HomeMy WebLinkAboutCOM 0219.000 2008-2010
COLLEENM. SCHRANDT t pi N
Legislative Auditor
Mailing Address: : • Business Address:
(Former County Building) 333 Kilauea Avenue, Second Floor
25 Aupuni Street ;,-aM+{. Ben Franklin Building
Hilo, Hawaii 96720 ~~rF oi'M~•~~ Hilo, Flawai't 96720
County of Hawai `i
Office of the Legislative Auditor
Telephone: (808) 961-8386 Facsimile: (808) 961-8905
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March 25, 2009 Cn
J Yoshimoto, Chairperson CS and Council Members w
Hawaii County Council
333 Kilauea Avenue, Second Floor
Hilo, Hawaii 96720
Re: Follow-up Review of the 2006 Audit of the Department of Environmental
Management's Recycling and Diversion Grants Program.
Dear Chairperson Yoshimoto and Members of the Hawaii County Council:
Enclosed please find the Office of the Legislative Auditor's Follow-up Review of the
2006 Audit of the Department of Environmental Management's Recycling and Diversion
Grants Program.
We request that the follow-up report be placed on the first available meeting of the
appropriate Council Committee. Thank you.
Very truly your ,
COLLEEN SCHRANDT
Legislative Auditor
Enclosures
xc w/enclosures: Department of Environmental Management (3 copies)
Office of the Mayor (2 copies) Q
Comm. No.I
Ref. To:
Ref. Date MAR 9
Serving the Interests of the People of Our Island
Hawaii County is an Equal Opportunity Provider and Employer
Follow-up Review of the 2006 Audit
of the Department of Environmental
Management's Recycling and
Diversion Grants Program
A Report to the
Hawai'i County
Chair and
Members of the
County Council
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Report No. 09-01
March 2009
THE OFFICE OF THE
LEGISLATIVE AUDITOR
COUNTY OF HAWAII
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EXECUTIVE SUMMARY
The Legislative Auditor's Office has completed a Follow-up Review of the Department of Environmental
Management's Recycling and Diversion Grants Program. This follow-up review was conducted in
accordance with Generally Accepted Government Auditing Standards (GAGAS).
Criteria
GAGAS Section A.1.06 provides, in pertinent part, that:
• "Those charged with governance have the duty to oversee the strategic direction of the entity and
obligations related to the accountability of the entity. This includes overseeing the financial reporting
process, subject matter, or program under audit including related internal controls...."
GAGAS Section A1.08 specifies that management of an audited governmental entity is responsible for:
• .a. using government resources legally, effectively, efficiently, economically, ethically, and equitably
to achieve the purposes for which the resources were furnished or the program was established;
• b. complying with applicable laws and regulations
• c. implementing systems designed to achieve compliance with applicable laws and regulations;
• d. establishing and maintaining effective internal control to help ensure that appropriate goals and
objectives are met
• e. providing appropriate reports to those who oversee their actions and to the public in order to
demonstrate accountability
f. addressing the findings and recommendations of auditors and maintaining a process to track
the status of such findings and recommendations
• [g. not applicable)
• h. taking timely and appropriate steps to remedy fraud, illegal acts, violations of provisions of
contracts or grant agreements, or abuse that auditors report to it."
Background
At the request of the Council in Resolution No. 168-05, our office conducted a limited scope performance
audit of the Department of Environmental Management's 11 Recycling and Diversion Grant Programs for
fiscal years 2004 and 2005 and issued our report in June 2006. Major deficiencies identified in our
original audit report included the lack of written policies and procedures related to internal and external
communications, procurements, contracting, file organization, and program documentation; the lack of
internal controls for accurate measurement, data reconciliation, and independent validation of solid waste
commodities being claimed under each diversion program; and the lack of a County-wide commitment by
the executive and legislative branches to implement a long-term solid waste management solution.
Purpose
In accordance with GAGAS, we are required to follow up on all significant audit findings and
recommendations to determine whether issues identified in the original audit report have been
appropriately addressed. The specific purpose of this follow-up review is to determine whether those
County managers and elected officials charged with responsibility for and authority over areas of concern
identified in the original audit report have implemented action plans to satisfactorily address program
deficiencies or management and policy issues cited in the original report.
Scope and Methodology
Our office requested that the Department of Environmental Management provide a written update
outlining what remedial measures had been planned and the timelines for and status of their
implementation, and what successes had been achieved in addressing specific audit recommendations.
We performed limited scope inquiry, observation, and testwork to independently corroborate and evaluate
the effectiveness of actions reported as implemented by respective departmental and other County
personnel.
Results
Significant improvement was noted in procurement practices, contract language, file organization, and
program documentation. Procurement and contract documents now more clearly delineate specific
commodities, volumes, and requirements for diversion, recycling, and/or reuse. Policies and procedures
were implemented for more timely dissemination of and response to external communications, including
governmental regulatory notices; more reliable documentation of contract authorizations, amendment
requests, and changes; and more consistent review of contractor claims reports and documentation of
payment approvals.
However, significant deficiencies continue to exist in the following areas:
• Risk of abuse or fraud remains high due to continued failure to include or enforce contract provisions
and internal controls relating to contractor tonnage claims for commodities being hauled,or diverted.
o Disclosure of "related or affiliated party" and "conflict of interest" relationships between
contractors and end-market users and/or implementation of mitigating controls are lacking. For
commodities such as glass, scrap metal, and mixed recyclables, DEM continues to permit end-
market users to substantiate contractor tonnage claims without independent verification, even
when the end-market user and the diversion contractor are affiliated entities or the end-market
user has a financial relationship with the diversion contractor. In some instances,; DEM permits
the diversion contractor to be the end-market user, with no additional controls in place.
c Independent verification of contractor claims for diverted commodities is lacking. For
commodities such as transfer station hauling, green waste, and glass, no controls are in place to
prevent the contractor from weighing and claiming the commodity multiple times. ,
Risk of liability and financial loss remains high due to the practice of permitting contractors to
commence work or deliver services prior to contract execution and/or with accounts receivable
outstanding to the County.
o 12 of 16 contracts or contract supplements reviewed were signed after their start-dates.
o On at least one occasion, contracts were awarded and payments continue to be made to a
contractor with past due tipping fees of $90,000 at the time of award, even when contracts
provide that "all bidders having an accounts receivable with the County of Hawaii shall be in good
standing."
•i Risk of mismanagement and financial loss remains high due to insufficient and ineffective program
reporting of relevant, timely, and accurate data that would permit proactive management of contractor
performance and assessment of departmental controls. While DEM indicates that progress has been
made to permit some program reporting using the County's FRESH accounting system. we noted the
following continuing inefficiencies:
o Program managers do not have direct inquiry access to the FRESH accounting system to track
program expenditures, nor are they provided with relevant contract or program expenditure
reports on a regular basis. As a result, program managers must track contract expenditures on
separate spreadsheet applications outside of the FRESH accounting system.
o No reconciliation of data from spreadsheet applications to the FRESH accounting system is
conducted to confirm the accuracy of program reports.
o No analysis or implementation of improved project/program accounting modules has been
conducted by the County. Audits of other County departments have noted similar inefficiencies of
redundant data entry into independent systems because the County's FRESH accounting system
lacks the capability to provide necessary reports and is not integrated with other available
applications.
Conclusion
Fundamental to any meaningful assessment of the County's recycling and diversion efforts is the basic
ability to accurately measure waste flows by type and track costs related to their specific modes of
diversion. DEM managers indicate that they feel implementing adequate controls would make the
programs too costly, therefore they have been willing to accept the risks of fraud and/or abuse related to
inadequate controls in order to gain the benefits of diverting solid waste commodities from our landfills.
While the Auditor agrees that there are significant environmental, social, and operational benefits to
diverting these commodities from the County's waste stream, County government is not relieved of its
responsibility to provide public programs and services in a fiscally prudent and accountable manner.
The Auditor recommends that the County perform cost-benefit analyses to assess whether it would be
more cost-effective to conduct hauling from transfer stations and possibly subsequent diversion or
recycling activities with County personnel, thereby reducing verification and control requirements
associated with private contractors. Should the County decide to continue outsourcing components of its
recycling and diversion programs, it should implement proper controls to reduce the risk of abuse and/or
fraud or the perception of impropriety by requiring proper disclosure of contractor relationships and
independent third-party verification of contractor tonnage claims. The County should also pursue alternate
State and Federal funding and directly administer its recycling and diversion programs whenever possible
to minimize excessive loss of funds to multiple layers of contractors and subcontractors for administrative
rather than program activities.
The Mayor and his cabinet can assist DEM and other County departments by providing information
management systems that can efficiently gather data and report outcomes, so they may better exercise
managerial and fiscal controls and improve their delivery of services to the public. The Finance
Department and Corporation Counsel can assist by developing and implementing standardized policies
and procedures to ensure that all contracts clearly delineate contractor performance expectations as well
as remedies for failure to deliver goods and services, and by providing training on contract formulation
and documentation of contractor performance. The Council can assist DEM by participating in the Update
to the County's Integrated Solid Waste Management Plan and committing to its adoption and funding of
its implementation, and by requiring regular detailed reports on program status and operational activities
to provide greater accountability and transparency to the public.
Most importantly, the "Tone at the Top" set by the Administration and the Council needs to communicate
that the County's commitment to source reduction, recycling, and diversion of its waste stream is
balanced with the County's commitment to monitor and deliver cost effectiveness and expense
reconciliation. Only through the implementation of internal controls, performance measures, reliable data
systems, and regular public reporting by newly elected officials and new managers at the Department of
Environmental Management can their governmental responsibilities for public accountability and
transparency be achieved.
Colleen Schrandt
Legislative Auditor
March 2009
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a TABLE OF CONTENTS
REPORT FORMAT AND CRITERIA
TABLE OF RECOMMENDATIONS BY GRANT PROGRAMS I
General Findings ......................................................................................................i
Diversion Grant Program ii
ADF - Glass Container Recovery Program m
HI5 - Beverage Container Deposit Program .................v
Green Waste Program ..............................................................................................................................................vi
Scrap Metal Program vii
Househould Hazadous Waste Program ix
West Hawai'i Material Recovery Program ..................................................................................................................x
Tire Recycling Program A
IUI EPA Grants Phase I xii
Kea'au Recycling and Reuse Center (KKRC)
EPA Grants Phase II .
Kea'au Recycling and Reuse Center (KKRC)
EPA Grants - Phase III AV
Waste Reduction and Recycling Project (West Hawai'i)
RECOMMENDATIONS - GENERAL FINDINGS ..........................................................................................................1
a RECOMMENDATIONS - DIVERSION GRANT PROGRAM .......................................................................................15
RECOMMENDATIONS - ADF-GLASS CONTAINER RECOVERY PROGRAM ........................................................20
I RECOMMENDATIONS - HIS - BEVERAGE CONTAINER DEPOSIT PROGRAM ....................................................28
L~ RECOMMENDATIONS - GREEN WASTE PROGRAM .............................................................................................30
RECOMMENDATIONS-SCRAP METAL PROGRAM ..............................................................................................35
RECOMMENDATIONS - HOUSEHOLD HAZARDOUS WASTE PROGRAM ............................................................41
RECOMMENDATIONS - WEST HAWAII MATERIAL RECOVERY PROGRAM ......................................................43
n RECOMMENDATIONS - TIRE RECYCLING PROGRAM ..........................................................................................45
S I RECOMMENDATIONS - EPA GRANTS - PHASE 1 ..................................................................................................50
Lj Kea'au Recycling and Reuse Center (KKRC)
RECOMMENDATIONS - EPA GRANTS - PHASE 11 .................................................................................................51
Kea'au Recycling and Reuse Center (KKRC)
RECOMMENDATIONS - EPA GRANTS - PHASE III ................................................................................................53
Waste Reduction and Recycling Project (West Hawai'i)
APPENDIX „A.. ...........................................................................................................................................................55
Anaysis of Recycling and Diversion by Commodity and Fiscal Year
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REPORT FORMAT
The 2006 Performance Audit Report of Hawaii County's Recycling and Diversion Grants
'Program presented General Findings related to departmental and County-wide management and u
,policy issues and Specific Findings related to each of the 11 Recycling and Diversion Grant Programs. q
This 2009 Follow-up Review of Hawaii County's Recycling and Diversion Grants Program J I
utilizes a similar format: L1
• We list our original June 2006 recommendation for each audit finding, followed by the
Department of Environmental Management's February 2009 response as to action plan and
implementation status (DEM Response) and our March 2009 assessment (LAO I Follow-Up).
• For copies of Attachments A to J referenced in DEM Response, please contact the
Legislative Auditor at (808) 961-8490 or cschrandtCa)co.hawaii.hi.us.
• Preceding our follow-up report is a table that summarizes the original audit recommendations r~
by grant program, the status of DEM's action plans, and the page numbers in thel report where JLJ)
further discussion can be found.
REPORT CRITERIA
Both the 2006 Performance Audit Report and 2009 Follow-up Review were conducted in U
iaccordance with Generally Accepted Government Auditing Standards (GAGAS) issued by the U.S. J j
4Government Accountability Office. The County's Recycling and Diversion Grants Program was u
,:reviewed for its compliance with the following applicable sections of generally accepted government
auditing standards:
• GAGAS Section A.1.06 provides, in pertinent part, that:
"Those charged with governance have the duty to oversee the strategic direction of the entity
and obligations related to the accountability of the entity. This includes overseeing the o
financial reporting process, subject matter, or program under audit including related internal
controls...."
• GAGAS Section A1.08 specifies that management of an audited governmental
entity is responsible for:
"a. using government resources legally, effectively, efficiently, economically, Ithically, and
equitably to achieve the purposes for which the resources were furnished orl the program
was established;
b. complying with applicable laws and regulations
c. implementing systems designed to achieve compliance with applicable laws and a
regulations;
d. establishing and maintaining effective internal control to help ensure that appropriate goals
and objectives are met
e. providing appropriate reports to those who oversee their actions and to the public in order
to demonstrate accountability
f. addressing the findings and recommendations of auditors and maintaining a process to
track the status of such findings and recommendations
[g. not applicable)
h. taking timely and appropriate steps to remedy fraud, illegal acts, violations of provisions of
contracts or grant agreements, or abuse that auditors report to it."
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RECOMMENDATIONS-GENERAL FINDINGS
TABLE OF RECOMMENDATIONS BY GRANT PROGRAMS
D RECOMMENDATIONS - GENERAL FINDINGS STATUS REPORT
REFERENCE
1. We recommend that the Mayor and County Council, in consultation with DEM,
revise and adhere to the Updated ISWMP as the long-term plan for addressing PENDING pp 1 - 2
the County's solid waste streams.
2. We recommend a detailed "working plan" be developed to drive and guide PENDING pp. 2 - 5
implementation of the Updated ISWMP.
3. We recommend that DEM evaluate areas of possible risk and exposure and
develop and implement written policies and procedures to reduce said risk and PENDING pp. 5 - 11
n exposure.
~lJl 4. We recommend that DEM consult with the Finance Department and the
Corporation Counsel to develop written policies and procedures relating to PENDING pp.11 - 12
procurement and contracting.
n 5. We recommend that the County Council adopt an ordinance to clearly establish
+lJl the County's authority to audit any entity with which it contracts, regardless of PENDING p. 12
whether the procurement is subject to or exempt from State and County
procurement code provisions.
6. We recommend that DEM evaluate and implement processes and procedures to IN
provide departmental capabilities for regular and continuous measurement of the PROGRESS pp. 12-13
volume of various waste types entering and being diverted from the County's solid
waste system.
D 7. We recommend that DEM include accurate descriptions and measurements of the IN
volumes of specific waste types to be processed under each procurement and PROGRESS pp.13 - 14
contract document, as well as specific requirements for diversion, recycling,
and/or reuse of waste types under each procurement and contract document.
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RECOMMENDATIONS -DIVERSION GRANT PROGRAM
RECOMMENDATIONS - DIVERSION GRANT PROGRAM STATUS, REPORT
REFERENCE
1 We recommend that the County obtain a legal opinion regarding the award of
grants and grant contracts by County agencies and the applicability of HRS IMPLEMENTED p.15
§103D-102(b)(2)(A), Hawai'i County Code chapter 2, article 25, and other
statutory, code, and charter provisions.
2 We recommend that the County review the issues of "conflict of interest" and J I
"related party transactions" adopting any necessary revisions to the County PENDING pp. 15-16 u
Code in order to reduce the risk of abuse and/or fraud or perception of
impropriety by the public.
& We recommend that DEM establish a standardized policy pertaining to program IN pp. 16 - 17
file documentation. PROGRESS n
4. We recommend that DEM ensure the timely procurement of its contracts so that IN p. 17 ILJY
a valid contract is issued prior to commencement of work. PROGRESS
5' We recommend that DEM review all contracts to ensure the accuracy and IMPLEMENTED p. 17
completeness of each contract.
6i We recommend that the County and DEM consider whether a dedicated IN p. 18
personnel position is warranted to be tasked with the responsibility for PROGRESS
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procurement and contract management, implementation of industry best I I
practices, and monitoring of compliance with regulatory requirements. yU-~r
T We recommend that DEM review current contracted operations to identify areas IN I ' I
of control deficiencies that increase the risk of contractor abuse and/or fraud, PROGRESS p. 18-19 U
and implement corrective measures to ensure accuracy of claims and fiscally
responsible use of grant monies. a
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RECOMMENDATIONS - ADF - GLASS CONTAINER RECOVERY PROGRAM
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RECOMMENDATIONS - REPORT
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ADF - GLASS CONTAINER RECOVERY PROGRAM STATUS REFERENCE
1. We recommend that the County obtain a legal opinion as to whether the ADF
and Diversion Grant programs are, in fact, exempt from the State procurement IMPLEMENTED p.20
code under HRS §103D-102(b)(2)(A).
O 2. We recommend that the County amend its Code to clearly establish its authority
to audit any entity with which it contracts, regardless of whether the procurement PENDING p.20
a is subject to or exempted from State and County procurement code provisions.
3. We recommend that the County incorporate into all contracts exempted from
D State and County procurement codes, excerpts from the "General Terms and
Conditions' of said codes which afford the County better protections and IMPLEMENTED pp.20-21
remedies against collusion, abuse, and fraud without subverting the flexibility
intended by the exemptions.
U 4. We recommend that DEM revise Grant Guidelines and subsequent monitoring IN pp. 21 - 23
practices to ensure accuracy of contractor claims and to reduce the risk of PROGRESS
errors, abuse and/or fraud.
5. We recommend that DEM review its ADF program for glass source streams that
are not currently being measured, and implement corrective actions to provide PENDING p. 24
greater accountability without causing undue hardship to contractors or County
personnel in their application.
6. We recommend that DEM determine whether additional. positions will be
required to meet timelines for procurement and contract issuance and to IN p.24
conduct necessary oversight and monitoring of contractor performance under PROGRESS
Q procurement and contract agreements.
7. We recommend that DEM research utilizing the project accounting module of
a the County's FRESH accounting system to assist in more efficient financial PENDING pp.24-25
monitoring and reporting.
8. We recommend that DEM develop a formal policy and procedure for p.25
authorization, documentation, and systematic recordation of changes to its IMPLEMENTED
contracts and budgets.
9. We recommend that DEM establish a formal policy and procedure whereby IN
financial status reports at contract and program levels are regularly and timely PROGRESS p. 25
provided to and monitored by a designated budget responsible manager within
the department.
10. We recommend that DEM obtain specific written clarification from DOH as to IMPLEMENTED p. 25
whether its "glasscrete" projects will satisfy all or portions of the "glassphalf'
paving requirement under HRS §342G-86(a)(2).
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RECOMMENDATIONS - ADF - GLASS CONTAINER RECOVERY PROGRAM
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RECOMMENDATIONS -
REPORT
ADF - GLASS CONTAINER RECOVERY PROGRAM STATUS REFERENCE
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11. We recommend that DEM work closely with DOH and other counties to address
data deficiencies and possible solutions such as, reporting of ADF glass PENDING p.26
imported or manufactured at both the county and State levels.
1112. We recommend that DEM further research the history of ADF accounting within IMPLEMENTED pp. 26 - 27
the State Environmental Management Special Fund.
13. We recommend that the department and the County address issues created by IN p.27
the severe reduction or possible discontinuation of State funding for the ADF PROGRESS
program.
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RECOMMENDATIONS - HIS - BEVERAGE CONTAINER DEPOSIT PROGRAM
RECOMMENDATIONS - REPORT
n STATUS REFERENCE
{I J HIS - BEVERAGE CONTAINER DEPOSIT PROGRAM
1. We recommend that DEM work with DOH to establish certified redemption IN
centers in those areas currently unserved or under-served as required by HRS PROGRESS p. 28
§342G-113(d) and/or HAR §11-282-62(a).
a 2. We recommend that DEM work with other counties and DOH to assess current IN
program deficiencies at all levels and to formulate countermeasures and PROGRESS p.28
procedures to address them.
3. We recommend that DEM work more closely with ARC to ensure that sufficient
control mechanisms are in place and that regular review and reconciliations are IN pp. 28 - 29
performed to confirm accuracy of data collected and reduce the risk of PROGRESS
contractor errors or abuse.
4. We recommend that DEM continue to support ARC's efforts to make transfer
station redemption centers and public participation projects more convenient IMPLEMENTED p.29
and user-friendly. _
5. We recommend that DEM prepare a master internal check list/review form to IMPLEMENTED p.29
accompany contractor payment requests.
a 6. We recommend that the County Council clarify by ordinance the County's p.29
authority to audit any and all of its procurement contracts including any sub-tier PENDING
contracts.
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RECOMMENDATIONS - GREEN WASTE PROGRAM
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RECOMMENDATIONS - GREEN WASTE PROGRAM STATUS REPORT
REFERENCE
111'. We recommend that a cohesive vision be developed to address solid waste
management in Hawai'i County, including input from the general public, IN P.30
Environmental Management Commission, Department of Environmental PROGRESS
Management, the Mayor, and the County Council. The Updated ISWMP needs
to be revised to reflect this vision.
2. We recommend that the Hawai'i County Code be amended to address the IN p. 30
banning of household and commercial green waste from County landfills in PROGRESS
accordance with Hawai'i Administrative Rules §11-58.1-65(b).
3~. We recommend that Landfill operation plans need to be
updated in accordance I
with current statutory and regulatory requirements and the County's Updated IN p. 31 r-.
ISWMP, and communicated to landfill management, operations personnel, PROGRESS
contractors, and the general public.
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4li We recommend that DEM develop and implement formal policies and n
procedures for responses to any and all regulatory agency warnings and u
violation notices, including to whom and when these warnings and notices IMPLEMENTED p, 31
should be communicated, and procedures to ensure timely follow up and a
resolution.
5. We recommend that DEM determine whether a dedicated personnel position
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should be tasked with the responsibility for monitoring of contracts and IMPLEMENTED pp, 31 - 32 U
contractor compliance. LJ
6. We recommend that DEM establish standardized internal policies and IN pp. 32 - 33 O
procedures for program documentation and reporting. PROGRESS
71. We recommend that DEM establish standardized policies and procedures to IN p. 33 a
permit verification of contractor claims reports and reduce the risk of fraud PROGRESS
and/or abuse.
8. We recommend that DEM establish standardized policies and procedures for IN
monitoring and documenting vendor compliance with other contractual PROGREI S pp. 33 - 34
1 obligations.
9. We recommend that DEM obtain accurate estimates of green waste volumes to IN p. 34
be processed for inclusion in procurement documents. PROGRESS
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RECOMMENDATIONS - SCRAP METAL PROGRAM
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RECOMMENDATIONS - SCRAP METAL PROGRAM STATUS REPORT
REFERENCE
1. We recommend that DEM ensure that the award entity is a "legal" entity prior to
contract award and that there is sufficient documentation in the program file to IMPLEMENTED p. 35
explain inconsistencies between the names of original bidders and names of
vendors awarded contracts during the procurement process.
2. We recommend that DEM ensure that personnel with sufficient training and IN p.35
expertise are assigned to supervise the contract procurement process. PROGRESS
I 3. We recommend that DEM ensure that personnel with sufficient training and
LLLJJJ expertise are assigned to monitor each contract after issuance to ensure IN p. 35
departmental and contractor compliance with all contractual, regulatory, and PROGRESS
D operational requirements.
4. We recommend that DEM ensure that proper permits are obtained prior to any IN p. 36
contractor commencing work on any contract on any County property. PROGRESS
5. We recommend that DEM ensure that contractors obtain necessary permits and IN p. 36
provide documentation of work performed before disbursing any County funds. PROGRESS
6. We recommend that DEM develop and implement policies and procedures to p. 36
D adequately verify the accuracy and integrity of the contractor's claims of scrap PENDING
metal removed from County storage sites.
7. We recommend that DEM address any warning letter received from DOH-
SHWB or any other regulatory agency in a timely manner to avoid assessment IMPLEMENTED p.36
of fines and penalties and possible termination of permits.
D 8. We recommend that RFP and contract documents require contractors to p.37
lJ respond within a given time to any communications pertaining to complaints or IMPLEMENTED
deviations from program, permit, or other regulatory requirements.
D 9. We recommend that DEM document any operational problem with a contractor IN p 37
I(~, during the administration of a contract. PROGRESS
L7 % We recommend that DEM document its own departmental responses and IN pp. 37 - 38
corrective actions taken to resolve operational problems. PROGRESS
D 11. We recommend that DEM adhere to contractual provisions particularly regarding IN p. 38
vendor compensation. PROGRESS
D 12. We recommend that DEM reconcile contractor invoices against supporting IMPLEMENTED p.38
documentation before processing payment.
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RECOMMENDATIONS - SCRAP METAL PROGRAM D
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RECOMMENDATIONS - SCRAP METAL PROGRAM STATUS REPORT
REFERENCE
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13. We recommend that DEM monitor fund balances to ensure that funds are PENDING p.39
available to pay contractor invoices.
D
1 We recommend that DEM implement processes and procedures to permit PENDING p.39
ongoing and accurate measurement of incoming tonnages.
15. We recommend that DEM implement necessary changes to obtain accurate PENDING p.39
estimates of volume to be processed for inclusion in procurement documents.
D
16. We recommend that DEM implement standardized project accounting utilizing the p.40
County's FRESH financial accounting system to better monitor fund balances and PENDING
to create reports for dissemination to proper personnel on a regular and timely
basis.
17. We recommend that DEM explore the possibility of exercising its right to assess PENDING pp. 40 D
fines and penalties against contractors to enforce compliance with contractual
terms and conditions.
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RECOMMENDATIONS - HOUSEHOLD HAZARDOUS WASTE PROGRAM
RECOMMENDATIONS - REPORT
HOUSEHOLD HAZARDOUS WASTE PROGRAM STATUS REFERENCE
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1. We recommend that DEM together with the County review current procedures
and research possibilities for new economically feasible technologies, facilities, IN p 41
and procedures that would identify and prevent hazardous wastes from entering PROGRESS
County landfills.
2. We recommend that the County establish permanent sites for ongoing collection IN p. 41
a of both household and commercial hazardous wastes. PROGRESS
3. We recommend that DEM clarify the applicability of HRS chapters 342G and
342J to the County's household hazardous waste program, and either bring the IMPLEMENTED p.42
program into compliance with statutory requirements or obtain a legal
determination that compliance is being waived by the State.
D 4. We recommend that DEM implement procedures for reconciliation of contractor IN p.42
collections reports with shipping manifests and delivery receipts from certified PROGRESS
reuse and disposal facilities.
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RECOMMENDATIONS -WEST HAWAII MATERIAL RECOVERY PROGRAM D
RECOMMENDATIONS- REPORT
STATUS REFERENCE
WEST HAWAII MATERIAL RECOVERY PROGRAM
1. We recommend that DEM retain in its program file any and all documentation I'I D
pertaining to changes noted on any County form or contract. Should any IMPLEMENTED p.43
Contractor or Consultant mark or change any County form, documentation and
authorization needs to be provided.
2. We recommend that DEM require a Contractor or Consultant to comply with p.43
contractual timelines for submittal of required plans and applications and should IMPLEMENTED
document said compliance in the program file.
3. We recommend that DEM assign specific personnel to track and monitor a IN pp. 43 - 44
Contractor's or Consultant's performance and compliance with contractual PROGREI S D
requirements prior to payment of any invoices for services.
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RECOMMENDATIONS - TIRE RECYCLING PROGRAM
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D RECOMMENDATIONS- REPORT
STATUS REFERENCE
TIRE RECYCLING PROGRAM
D 1. We recommend that the County Code, Updated ISWMP, and DEM landfill IN
operations manuals be reviewed and further updated to be consistent with the PROGRESS p. 45
State ban of used tires from County landfills.
D 2. We recommend that DEM implement a process to ensure that all interested
parties are included in the IFB process to ensure strict adherence with IN p.45
procurement laws and to enable the County to contract for quality services at PROGRESS
reasonable prices.
D 3. We recommend that the Purchasing Division and DEM determine whether file PENDING pp. 45-46
documentation can be improved to develop a priority list for procurements.
4. We recommend that DEM implement formal policies and procedures for p.46
program review and contractor evaluation to better determine whether a current PENDING
n contract should be extended or a new procurement process should be initiated.
U 5. We recommend that DEM determine why timeliness in its procurement is PENDING pp.46-47
problematic and implement appropriate countermeasures.
a 6. We recommend that DEM develop formal procedures and forms for IMPLEMENTED p.47
authorization of contract-related changes such as account balance liquidation.
7. We recommend that DEM review documentation submitted by contractors for IN p. 47
compliance with contractual and regulatory permit requirements. PROGRESS
I f 8. We recommend that DEM develop policies and procedures pertaining program IN pp. 47 - 48
~J incident resolution and reporting. PROGRESS
9. We recommend that DEM provide staff with clearly defined job responsibilities IN
and adequate training and policy guidance regarding transfer station operations PROGRESS
and contractor monitoring duties.
D 10, We recommend that DEM implement the changes necessary to provide the IN
capability to obtain accurate estimates of volumes to be processed for inclusion PROGRESS p. 48
D in procurement and contract documents.
11. We recommend that DEM implement a mechanism for ongoing measurement IN pp. 48 - 49
of inflow volumes. PROGRESS
L1
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A
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RECOMMENDATIONS - EPA GRANTS- PHASE I Kea'au Recycling and Reuse Center (KKRC)
D
RECOMMENDATIONS - EPA GRANTS - PHASE I STATUS REPORT
REFERENCE
Kea'au Recycling and Reuse Center (KKRC)
1 We recommend that the County as EPA Grant awardee monitor and PHASES / AND II ARE p. 50 D
review all procurement processes and obtain sufficient documentation CLOSED.
to provide assurance that all procurements are made in accordance
with applicable grant and procurement laws and regulations. REMAINING PHASE III
FUNDS WILL BEI
2I. We recommend that DEM ensure the timely procurement of its UTILIZED FOR REUSE
contracts and/or agreements, so that a valid contract is issued prior to SHELTERS AT
commencement of work. TRANSFER STATIONS.
3. We recommend that the County consider revision of the County Code PHASE /V FUNDS WERE D
and procurement rules relating to "conflict of interest" and "related GRANTED DIRECTLY TO
party" issues on the part of employees, contractors and H/EDB.
subcontractors. D
FORMER DIVERSION
4. We recommend that DEM implement policies and procedures for GRANT SERVICES ARE
monitoring and control of contractor performance to ensure that NOW SUBMITTED TO
contractual obligations to the County are being fulfilled and public FORMAL PROCUREMENT j~
funds are being properly expended. PROCESS. U
5. We recommend that DEM assign personnel to reconcile contractor
claims and authorize payment of invoices. n
a. We recommend that DEM include in its program file any and all IIJI
documentation pertaining to any complaints, improprieties, or
discrepancies that may occur during a contract period, including a a
chronology of the resolution process.
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II ~I D
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xii
D
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RECOMMENDATIONS - EPA GRANTS - PHASE II Kea'au Recycling and Reuse Center (KKRC)
RECOMMENDATIONS - EPA GRANTS - PHASE II REPORT
a REFERENCE
Kea'au Recycling and Reuse Center (KKRC) STATUS
1. We recommend that DEM re-evaluate its procurement process to PHASES I AND II ARE pp. 51 - 52
ensure that all performance requirements and tasks are sufficiently CLOSED.
communicated to all potential providers and that process volume
estimates are realistic. REMAINING PHASE 111
FUNDS WILL BE
2. We recommend that DEM document issues related to supplemental UTILIZED FOR REUSE
contracts when two different fund sources are involved. SHELTERS AT
a TRANSFER STATIONS.
3. We recommend that DEM reconcile contractor invoices with
supporting documentation and contractual requirements and should PHASE IV FUNDS WERE
require that revised invoices be accompanied by written clarification of GRANTED DIRECTLY TO
a increased amounts. HIEDB.
4. We recommend that DEM re-evaluate its administration of grant FORMER DIVERSION
programs and analyze the cost-benefits of hiring additional personnel GRANT SERVICES ARE
D for grant management versus contracting private service providers. NOW SUBMITTED TO
FORMALPROCUREMENT
5. We recommend that DEM review and monitor its contracts to ensure PROCESS.
that all applicable governmental permits are obtained prior to
a commencement of work on County property.
6. We recommend that DEM ensure that all documentation relating to
grant and contract administration is current and complete in the
O program file.
7. We recommend that DEM document any deficiencies relating to
operations under its contracts. ,
a
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a
RECOMMENDATIONS - EPA GRANTS - PHASE III Waste Reduction and Recycling Project (West Hawaii)
a
RECOMMENDATIONS - EPA GRANTS - PHASE III ICI REPORT
STATUS REFERENCE
Waste Reduction and Recycling Project (West Hawaii)
1. We recommend that DEM initiate a complete assessment of waste PHASES I AND It ARE pp. 53 - 54
reduction, recycling, and reuse capabilities at County transfer stations. CLOSED.
2. We recommend that DEM implement internal policies and procedures REMAINING PHASE /it
for grant management. FUNDS WILL BEI
UTILIZED FOR REUSE -
3. We recommend that DEM consider revising HIEDB's project scope or SHELTERS AT
reduce its contract amount under the MOA, since establishment of the TRANSFER STATIONS.
model recycling or reuse center in West Hawai'i will not be
implemented prior to expiration of the EPA Grant III funding period. PHASE IV FUNDS WERE ILJI
GRANTED DIRECTLY TO
4. We recommend that DEM review departmental policy relating to multi- HIEDB.
tier subcontracting, and determine whether the practice is a cost a
effective use of grant monies. FORMER DIVERSION
GRANT SERVICES ARE
5. We recommend that as the designated recipient of EPA grant funds, NOW SUBMITTED TO
the County should re-evaluate the cost-benefit of hiring additional FORMAL PROCUREMENT 1-"}
departmental personnel over outsourcing program management and PROCESS. )L JI
outreach and education components.
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xiv
a
RECOMMENDATIONS-GENERAL FINDINGS
RECOMMENDATIONS - GENERAL FINDINGS
a General Findings Recommendation #1
We recommend that the Mayor and County Council, in consultation with DEM, revise and adhere to
O the Updated ISWMP as the long-term plan for addressing the County's solid waste streams.
• There needs to be a County-wide commitment for implementation of and adherence to a
long-term solid waste management plan on the part of all stakeholders, including the Mayor,
a DEM, County Council, and the recycling public, regardless of changes in elected officials.
o The County should consider codifying the "agreed" upon long-term solid waste
a management plan.
• If the Updated ISWMP is to represent the County's strategic plan for solid waste
management, it needs to be further updated and revised to address at a minimum:
o The priority, in quantifiable measures, of recycling and diversion in the County's solid
waste management system.
0 o Specific goals pertaining to solid waste reduction, recycling, and diversion, and specific
timelines for attaining said goals.
DEM Response
The 1SWMP is currently going through an update. Consultant CH2M Hill has been hired and started
the update process in the April 2008. The Solid Waste Advisory Committee (SWAC) was created,
a chaired by former DEM Director, Barbara Bell. We have conducted eight SWAC meetings and two
series of public meetings. In addition to the SWAC meetings, the presentation is on the agenda for
the County Council Environment Committee Meetings to keep the Council informed and current on
the ISWMP as it is being developed. We anticipate an 18 month process to finalize a draft Update
o which will be submitted to the County Council and the Mayor for their approval. The Update will then
be submitted to the State Department of Health for their review and approval. The Department is
considering several approval options, such as preparation of an ordinance to adopt and adhere to the
updated ISWMP. The chapters are available at the DEM website for public input and review.
http://www.co.hawaii.hi.uslenv mno/iswmp.htm. The chapters include:
1. Waste stream assessment
n 2. Source reduction
U 3. Public education and information
4. Recycling, bioconversion and marketing
5. Household hazardous waste and E-waste
6. Special waste
7. Collection and transfer
8. Residuals management
O 9. Administration and funding
10. Recommendations and implementation
LAO Follow-Up
D DEM has complied with portions of this recommendation by requiring that its ISWMP consultant
conduct public meetings and provide monthly reports to the Council in an effort to obtain input from
key stakeholders. However, full implementation of this recommendation goes beyond DEM's purview
and requires a commitment on the part of County government. Changing priorities of prior Mayoral
administrations and Councils have created a continually moving target for DEM in its attempt to
formulate a long-term plan to address the County's solid waste problems and maintain a clear vision
a 1
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RECOMMENDATIONS -GENERAL FINDING a
S
of how this goal should be accomplished The purpose of this recommendation is to provide DEM
with clear expectations including specific timelines reporting requirements and performance
measures and to provide residents with a mechanism for input and assessment of the County's
performance in addressing solid waste issues and protecting public resources both 'environmental
and monetary.
General Findings Recommendation #2
I
We recommend a detailed "working plan" be developed to drive and guide implementation of the
Updated ISWMP and should include, but not be limited to:
DEM Response D
Please see the response provided above (Recommendation No.l). The scope of work for the
consultants, CH214 Hill, was based on the requirements for the ISWMP as called out in the Hawaii
Revised Statues (HRS) Part 111. Integrated Solid Waste Management Planning §342G. We anticipate
an 18 month process to finalize a draft Update which will be submitted to the County Council and the
Mayor for their approval. The County-adopted Update will be submitted to the State Department of
Health for their review and approval. Some of the audit recommendations may be addressed in the
ISWMP if it was required and described in the HRS §342G. However, other audit recommendations
may not be included as they were not specifically identified in the consultant's original scope of work.
As the Update is well underway, the Department is not currently pursuing a revision) to the original
scope of work as it may jeopardize our ability to complete the Update with available funds,
manpower, and timeframes.
LAO Follow-Up
The audit recommendations were available to DEM prior to establishing the scope of work for the
Update to the ISWMP. The Auditor agrees that some of the items listed as part of this
recommendation are "managerial procedures" and may be more appropriately addressed by DEM a
outside of the ISWMP. However, whether part of or external to the ISWMP it is important that an
overall "working plan" delineate specific tasks, responsible parties and specific timelines to guide
implementation of the ISWMP.
• An outline and schedule of specific tasks and benchmarks required to attain Updated
ISWMP goals.
DEM Response t I
The ISWMP will include a 5-year implementation plan for the plan recommendations that includes I
funding levels for each recommendation. Any actions to be completed later than 5 years will be lJ
summarized into actions to be taken during years 6-20.
• An assignment of stakeholder responsibility for completion of specific tasks and
benchmarks.
DEM Response a
As described above, the ISWMP consultant original scope of work did not require that the Update
include a provision for assignment of stakeholder responsibility for completion of specific tasks and a
benchmarks as it is not a requirement of HRS §342G.
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RECOMMENDATIONS - GENERAL FINDINGS
a
• A mechanism for regular and frequent review and reporting of stakeholder progress
a by a body reporting to the legislative branch.
DEM Response
As described above, the ISWMP consultant original scope of work does not require that the Update
include a mechanism for regular and frequent review as it is not a requirement of HRS §342G.
LAO Follow-Up
Again, whether part of or external to the ISWMP, it is important that an overall "working plan"
delineate specific tasks, responsible parties, and timelines to guide implementation of the ISWMP.
The Council should also require regular reporting of actuals against the plan in order to ensure
effective resource planning and allocation, timely progress, and public accountability.
• Standardized criteria for evaluation of solid waste management programs,
technologies, and funding sources.
DEM Response
The ISWMP will present evaluation of a series of options.
a LAO Follow-Up
The evaluation process should be standardized and documented to permit future in-house analysis of
solid waste programs, technologies, and funding sources.
0
• An evaluation of regulatory constraints to implementation of identified solid waste
a management programs and technologies.
DEM Response
a The ISWMP will provide a list of recommended regulations which may be considered for
implementation at the County or State level to move forward the goals and objectives of the solid
waste management programs and technologies.
a • A timeline and prioritization schedule for implementation of identified solid waste
management programs and technologies.
a DEM Response
The ISWMP will include a 5-year implementation plan for the plan recommendations that includes
funding levels for each recommendation. Any actions to be completed later than 5 years will be
n summarized into actions to be taken during years 6-20.
I~ A standardized process for determining whether implementation and operation of
identified programs and technologies should be managed by County personnel or
outsourced to a private contractor.
DEM Response
This is outside the scope of the ISWMP. The KONO court decision describes when County of
Hawaii personnel will do the work. In addition Act 90 has expired.
a 3
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RECOMMENDATIONS -GENERAL FINDINGS
i
LAO Follow-Up a
This recommendation is not directed at the work-related legal requirements of the Kono decision. a
Rather, it is recommending an analysis of providing "in-house" solid waste management services with
County personnel due to the long-term need for such services and the time and costs required to
implement sufficient controls over privately contracted services. O
• A standardized policy and procedure setting forth departmental controls Ito be
implemented and identifying which departmental personnel will be responsible for
program oversight.
DEM Response
The ISWMP will describe the current department structure as it pertains to the management of the
solid waste division and recycling section. The department maintains a set of operational policies and
procedures specific to the solid waste division and recycling section, these policies al d procedures
are not planned to be included in the Update.
LAO Follow-Up
Based on discussions with DEM managers, there still seems to be uncertainty las to who is
responsible for ensuring that internal controls are included and implemented in each solid waste
diversion and recycling program. a
• A standardized process for reviewing and evaluating the County's, DEM's, and the
contractor's responsibilities and obligations under specific contracts, including a
monitoring of regulatory compliance and data reporting accuracy.
DEM Response a
This is beyond the scope of the ISWMP as it is not a requirement of HRS §342G.
LAO Follow-Up a
Agreed. However, the County as a whole should review key responsibilities in its procurement and
contracting processes and formalize policies and procedures related to the sufficiency and
enforcement of project specifications, internal controls, contractor performance measures, and
remedies for contractor non-compliance and non-performance.
• Standardized policies, procedures, and safeguards necessary to reduce the County s
risk to contractor abuse and/or fraud to acceptable levels.
DEM Response
As described above, the ISWMP consultant original scope of work did not require that the Update
include a provision for including standardized policies, procedures and safeguards as it is not a
requirement of HRS §342G. a
LAO Follow-Up
If so, DEM should develop, communicate, and implement standardized policies, or ocedures, and
safeguards in consultation with the Finance Department and Corporation Counsel.
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RECOMMENDATIONS - GENERAL FINDINGS
a
• An evaluation of legislative or governmental authority available to the County for
contract enforcement purposes.
DEM Response
The ISWMP scope of work was designed around the HRS §342G and is limited to that chapter.
LAO Follow-Up
If so DEM should develop communicate and implement standardized policies procedures and
safeguards in consultation with the Finance Department and Corporation Counsel
a Incorporation of public input into plan development and participation in future
recycling and diversion programs and technologies.
DEM Response
The ISWMP has designed into the scope of work, a number of opportunities for public input and is
O designed around maximizing the public input to reflect the needs of the public.
LAO Follow-up
a It is unclear whether this recommendation can be fully addressed within the Updated ISWMP since
an overall "working plan" may need to include certain internal organizational issues personnel
schedules, and departmental controls. If so DEM should identify these respective components and
0 develop separate action Dlans. In addition to referring the ISWMP Update to the Council for approval
or amendment. DEM should continue to regularly update the Council as to the status of
implementation of the ISWMP.
n Genera l'Findings Recommendation #3
U We recommend that DEM evaluate areas of possible risk and exposure and develop and implement
written policies and procedures to reduce said risk and exposure.
• Consult with the Finance Department and Corporation Counsel on development of a
risk management policy to limit the County's exposure to governmental sanctions and
civil liabilities.
a DEM Response
This recommendation should be pursued by Finance Department and Corporation Counsel as it will
a affect all County Departments, not just DEM.
LAO Follow-Up
Agreed However DEM will need to cooperate with the Finance Department and Corporation Counsel
in order for the County to properly assess and address risk management in its solid waste
management programs.
0
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RECOMMENDATIONS-GENERAL FINDINGS
• Consult with other County departments and State agencies to establish "best a
practices" in order to minimize its risk and exposure to governmental sanctions and
civil liabilities. a
DEM Response
This recommendation should be pursued by Finance Department as it will affect all County a
Departments, not just DEM.
LAO Follow-Up a
While overall risk management includes components outside of the department's urview, DEM
should devise a mechanism to incorporate "best practices" as they relate to the solid waste
management industry.
• Immediately transmit any and all communications received from governmental a
agencies regarding possible regulatory violations or sanctions to the Mayor,
Managing Director, Finance Director, Corporation Counsel, and County Council
DEM Response
Please refer to the letter from former Director Barbara Bell, dated July 10, 2006 on page 7- Risk
Management. a
LAO Follow-Up
It appears that DEM has implemented a procedure for timely communication and tracking of
responses to governmental regulatory notices when DEM is the permittee or co-permittee.
Develop formal written policies and procedures for general departmental a
administration as well as individual program management, including, but not limited
to:
o A file management system for departmental and contractor documents,
reports, plans, and other related information to ensure that program files are
current and complete.
DEM Response
DEM developed a formal contract policy effective 811106 (Refer to Attachment "A" Contract Policy) in o
response the audit recommendation: The purpose was to provide better tracking of contract history,
negotiations, or discussion, on issues that are unexpected, and to document discretionary decisions
instituting written policies and procedures for all contract files. It states that two (2) contract files are
to be maintained; one is a "program file" maintained by the section responsible for managing the
program and the second is a "contract file" to be maintained by the Business Services Section. The
Solid Waste operations and its sections are located in a separate location than the DEM
Administration and Business Services Section and the files are physically located with the respective
group. The program files for Greenwaste, Diversion Programs, Recycling Education) and Beverage a
Container Program are maintained by the Department's Recycling Section. The program files for
Scrap Metal and Tires are maintained by the Department's Abandoned Vehicle Program Staff The
Department of Health (DOH) Solid Waste Permits and any correspondence with DOH (where the a
County is co-permittee) are filed in the program file and a copy in the files for each Solid Waste
Facility maintained in the Solid Waste Division Chiefs Office. Many of the Transfe Stations have
6 a
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RECOMMENDATIONS -GENERAL FINDINGS
numerous DOH Solid Waste Permits. For instance Kealakehe has a permit for the transfer station
(aka convenience center), the Greenwaste Operation, the Recycling Operation and the Scrap Metal
Operation.
LAO Follow-Up
a The Auditor reviewed a sample of contract files and noted no significant deficiencies.
o A communication management system for intra-departmental, inter-
departmental, and public communications to ensure adequate and timely
response to and appropriate dissemination of any inquiry or complaint.
DEM Response
DEM policy for communication with other County departments is through the Department Director.
a The Department's Recycling Section receives numerous calls from the public. The calls are handled
directly by one of the Recycling staff. The Recycling Section maintains a call log record of incoming
calls and uses a form (Refer to Attachment "B" Contractor Complaint Form) to document specific
Q complaints. Currently DEM Solid Waste Division and Wastewater Division Staff are in separate
physical locations from DEM Administration and the Business Services Section which creates
communication challenges. DEM agrees that a communication management system would be
valuable. This is an excellent recommendation that will be implemented when appropriate staff and
funding are available. DEM is in the process of relocating the Solid Waste and Wastewater Division
personnel to the DEM Administration and Business Services Section office.
LAO Follow-Up
0 Although no written policy or procedure was provided, the Auditor noted significant improvement in
DEM's documentation of and responses to external communications.
o A program tracking system to monitor departmental and vendor compliance
with all contractual, permit, and regulatory requirements related to solid
waste management.
U DEM Response
a The State Department of Health (DOH) is the regulatory agency for Solid Waste permits in the entire
State, including the County of Hawaii. Any notification or warning letter received from the DOH is
assigned a numerical number in MS Outlook and is tracked by the DEM Secretary until an
a appropriate response has been prepared and issued by the Department, Division or Vendor.
LAO Follow-Up
Procurement documents clearly state: "all bidders having an accounts receivable with the County of
Hawaii shall be in good standing on that account". However, on at least one occasion, a contract was
awarded to a bidder with past due tipping fees of $90,000 at the time of contract award.
o An account tracking system to monitor contractor billings and payments by
utilizing the project accounting module within the County's FRESH
accounting system.
U 7
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RECOMMENDATIONS-GENERAL FINDINGS
DEM Response a
I
The Recycling Specialist has created spreadsheets to track contractor billings and payments o
relating to the Recycling Programs. At this time DEM believes these spreadsheets are a more
suitable option than the project accounting module in FRESH.
LAO Follow-Up a
Like other County departments DEM has implemented a separate program billingl and payment
tracking system that is not reconciled with the County's FRESH accounting system. The inefficiencies r
of redundant data entry in multiple information systems and possible inaccuracies in the absence of ILsI
data reconciliation are issues that need to be addressed County-wide.
o A formal process and schedule for periodic assessment and review of
program and departmental effectiveness and efficiency in achieving
objectives contained in the County's Updated ISWMP, the State's Hawaii a
Integrated Solid Waste Management Act, and federal EPA guidelines.
DEM Response
DEM agrees that a formal process and periodic review may be valuable. This is an excellent a
recommendation that will be implemented when appropriate staff and funding are available.
o A formal process and schedule for monitoring changes to County, Statle, and a
federal laws, rules, regulations, and requirements.
DEM Response a
DEM monitors the changes to County, State and Federal laws, rules, regulations and requirements
that would affect its operations or funding. DEM works closely with the State Department of Health
and the USEPA to stay updated on changes. DEM agrees that a formal process and periodic review a
may be valuable and will be implemented when appropriate staff and funding are available.
LAO Follow-Up a
To ensure continuity of institutional knowledge, DEM should formalize its process and schedule for
monitoring changes in governmental regulations by delineating specific tasks and responsible parties
in a process map or manual. n
Re-evaluate its organizational structure, staffing, and position descriptions, delermine U
program components and personnel necessary to carry out effective and efficient
operations, and implement necessary changes to ensure that internal controls and
staffing levels are sufficient to meet program demands.
o Develop departmental and division "process maps" to aid in evaluating the
adequacy of staffing levels.
EM Response
"Process mapping" may require the assistance of a specialized consultant to perform the analysis to
make recommendations for efficiency. The Department personnel specialist and the County's Dept.
of Human Resources have assisted in identifying and developing relevant position descriptions. The
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RECOMMENDATIONS - GENERAL FINDINGS
Department personnel specialist consults with the Division regularly to examine position needs for
future fiscal years.
o Review current staffing competencies and expertise to ensure that staff are
qualified to perform their required duties.
DEM Response
The Department's personnel specialist reviews job performance reports, concerns of the supervisors,
identifies training opportunities, and seeks training requests from the Divisions to improve skill levels.
LAO Follow-Up
a Again, the Auditor recommends an organizational re-evaluation followed by a reassessment of staff
competencies in order to ensure that internal controls and staffing levels meet program demands in
an effective and efficient manner. An increase in personnel does not necessarily ensure
improvement in internal controls and delivery of services to the public.
o Implement internal training programs to ensure that staff are competent and
knowledgeable in the performance of their duties.
DEM Response
The Department's personnel specialist will assist in finding appropriate training resources when the
Division does not have staff to conduct the training. The Division has a responsibility to train
employees to perform new duties and use new equipment brought into the workplace. The County
Safety Office provides equipment operator testing and training to reduce the threat of workplace
injuries.
LAO Follow-Up
The Auditor recommends a performance review of internal training programs after they have been
implemented to determine whether they have achieved their intended goals.
o Ensure that staff has sufficient time and resources necessary to effectively
perform their duties.
DEM Response
The Department's personnel specialist and/or process mapping consultant can assist the Division in
assessing the types of duties to be performed, the amount of time necessary to complete the duties,
and the number of staff necessary. The Division supervisory personnel will need to determine the
appropriate equipment necessary to do the work.
a o Reallocate positions as necessary.
DEM Response
The Department's personnel specialist works with the Division in updating position descriptions and
reallocating positions as the duties and needs change and will continue do so as requested. For
example, a Business Services Manager was created similar to the position in DPW. The Recycling
Specialist 1 position was reallocated to a Recycling Specialist Ill position. A Recycling Specialist 11
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RECOMMENDATIONS - GENERAL FINDINGS
position was created for West Hawaii. The Solid Waste Division Engineer position was also a
reallocated.
o Analyze the cost-benefit of hiring additional County personnel versus
continuing to outsource the recycling and diversion programs.
DEM Response
The personnel office in conjunction with the division can work on projecting the types of work to be
performed, positions needed, the comparable compensation, and a timeline to hire. As the staff
resources are available, the division and accounting office can perform the cost benefit analysis to
determine the appropriateness of hiring staff internally or contracting for such services.) However, this
type of analysis may be more effectively performed by an independent third party entity. New
position approval, however, is at the discretion of the County Council.
i 0
• If the department determines that it cannot remedy the foregoing deficienciesIwithin
the next six months, DEM should consider procuring a private consultant to assist in a
"process map" development, restructuring, development of internal management
policies and procedures, and training of its personnel as discussed above.
DEM Response a
This is an excellent recommendation and will be implemented when the appropriate staff and funding
are available.
LAO Follow-up a
Contract Files: Significant improvement in the organization and completeness of co tract files was
noted. Files reviewed were compliant with required tax clearances and unemployment/temporary
disability, workers' compensation, and prepaid health care insurance certificates. However, files
were inconsistent as to current certificates of general liability and/or automobile liability insurance for
required coverages and contract periods.
Contract Tracking System: Implementation of a contract tracking system using Excel spreadsheets
was noted, but no evidence of its periodic reconciliation with the FRESH system. As a result, we
noted inefficiencies with redundant data entry into multiple information systemsl and possible a
inaccuracies with data reporting in Excel not tied to the FRESH system. This problem is not unique to
DEM and is discussed in audit reports for other departments. Also absent was evidence of regular
and frequent reporting of financials to or by DEM managers. a
Communication Management System: No evidence was presented that an intra- and/or inter-
departmental communication management system had been implemented for the handling of public
inquiries or complaints. While the Recycling Coordinator has implemented a standard a
complaint/resolution form, the form is not utilized for all solid waste programs, with the Solid Waste
Chief indicating that the form will be implemented department-wide in the future. However, before
such implementation, a formal departmental policy for the handling of public complaints and proper
use of the complaint/resolution form needs to be developed.
Program Tracking System: No evidence was presented that a program tracking system had been
implemented to proactively monitor compliance with contractual and regulatory requirements or a
changes in contractual obligations and governmental regulations. Noted in certain program files were
warnings from the State Department of Health regarding continued non-compliance with permit
requirements, suggesting a continued reactive approach by DEM to regulatory compliance.
Program Assessment: No evidence was presented that a formal program assessm Int process and
schedule had been implemented to measure performance in achieving objectives 'outlined in the
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RECOMMENDATIONS - GENERAL FINDINGS
a County's Updated IWSMP, State Integrated Solid Waste Management Act, and federal EPA
guidelines. A key to any meaningful program assessment is the Department's basic ability to
accurately and independently measure waste flows by type.
Organizational Re-Evaluation: No evidence was presented that an organizational re-evaluation
a using accepted needs analysis methodology had been undertaken to support the Department's
request for additional personnel following issuance of our original audit report.
General Findings Recommendation #4
We recommend that DEM consult with the Finance Department and the Corporation Counsel to
develop written policies and procedures relating to procurement and contracting.
• Develop formal written policies and procedures related to contract procurement,
including timing of the procurement process, eligibility of contractors and
subcontractors, evaluation of contractors and subcontractors, and drafting of
procurement and contract documents. Contract provisions should address reducing
County exposure to contractor fraud and/or abuse by clearly delineating any process
and reporting controls as well as the County's right to audit contractors and
subcontractors. Contract provisions should clearly state that the County's right to
audit is not limited to examination of contractor records, and may include, but not be
limited to, site access, inspection, and process observation.
DEM Response
a The County Department of Finance is responsible for County Purchasing and the County must
adhere to State Procurement Laws. Since this recommendation is broad and would affect all County
Departments, the recommendation should be pursued by Finance Department in conjunction with
Corporation Counsel to determine if expansion of existing policies and procedures are necessary.
DEM has included language in its future contracts that will allow audits on it contractors.
LAO Follow-up
The Auditor did note that at least one RFP may have been unduly restrictive by requiring that "bidders
shall have a minimum of two years experience as a company owner or upper management of a firm
whose primary business is recycling." Presumably, the intent of this clause is to reduce the risk that a
bidder will be unable to meet the obligations of a recycling contract or program. However, since the
RFP included sufficient requirements such as submittal of operations and safety plans, schedules for
permit compliance, end-market user proposals, and the like, the inclusion of this clause only served to
a restrict competition.
• Develop formal written policies and procedures to ensure proper timing, review,
recordation, and maintenance of transactions relating to contractor billings and
payments in accordance with County policy and generally accepted accounting
principles.
a DEM Response
DEM agrees that formal written polices and procedures are important. This is an excellent
recommendation that will be implemented to expand on existing policies and procedures established
by the Department of Finance when appropriate staff and funding are available.
a 11
III
RECOMMENDATIONS - GENERAL FINDINGS
it Develop formal written policies and procedures related to the award of grant monies
to non-profit and for-profit entities.
DEM Response
DEM agrees that formal written polices and procedures are important. When the resources are
available this will be pursued. In response to the audit, DEM eliminated the Diversion Grant Program
and implemented the Diversion Incentive Program working with County Procurement Division,
Department of Finance on Request for Proposal (RFP) #2298 and Invitation to Bid (IFB) #2299. The
program services were expanded and the result was that the cost per ton for the services increased
substantially from what DEM was paying for the services in the Diversion Grant Program.
LAO Follow-up
The Auditor's analysis of DEM's reported diversion tonnages and related costs sh ws otherwise.
According to DEM's annual "Solid Waste Disposal Summary" the average cost perlton to recycle
and/or divert has decreased 31% from $69.23 in FY 2003-2004 to $47.67 in FY 2007-2008. a
Furthermore the tonnages claimed as diverted over the same period have increased 38% from
48.871 tons claimed in FY 2003-2004 to 86.535 tons in FY 2007-2008 Please see Appendix A:
Analysis of Diversion by Commodity and Fiscal Year.
a
General Findings Recommendation #6
We recommend that the County Council adopt an ordinance to clearly establish) the County's
authority to audit any entity with which it contracts, regardless of whether the procurement is subject
to or exempt from State and County procurement code provisions. a
DEM Response
We agree and recommend that this recommendation be pursued by the County Coun !l, Department
of Finance and Corporation Council. o
LAO Follow-up
The maiority of contracts reviewed now contain a "right-to-audit" clause. a
General Findings Recommendation #6
We recommend that DEM evaluate and implement processes and procedures to provide a
departmental capabilities for regular and continuous measurement of the volume of various waste
types entering and being diverted from the County's solid waste system.
DEM Response a
The Department's Solid Waste Division has procedures to measure the volume of waste landfilled
from commercial and residential sources. It also provides the volume of materials diverted by
commodity types like greenwaste, scrap metal, etc. (Refer to Attachment "C" Solid Waste Disposal
Summary). Consultant CH214 Hill, as part of the ISWMP plan, completed a Waste Composition
Report in September 2008 to determine the types of wastes that are being landfilled. A link to the 69
page report is
http:Owww.hawaii-countv.com/env mng/swmiswmp/Waste%2OComnosition%20Report.pol
I
12 a
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RECOMMENDATIONS-GENERAL FINDINGS
a
LAO Follow-up
DEM has made progress in obtaining independent measurement of certain diversion flows.
For green waste and scrap metal hauled from the South Hilo and Kea'au transfer stations,
a commodities are weighed at the County's Hilo landfill scale. In Kona, green waste is paid by the load
with visual verification by County-paid security services, together with daily reconciliation of security
personnel and contractor load logs.
However, for ADF-glass and HI-5 beverage containers, we noted continuing problems with
independent verification of contractor claims for recyclables. One contractor is permitted to make
claims for commodity tonnages based on weight tickets produced by its own drivers on its own weight
a scale at its own facility. Moreover, the contractor is permitted to act as its own end-market user for
diverted glass, which it crushes and stockpiles at its own facility with no independent verification as
to segregation of newly hauled and previously diverted glass. This lack of internal controls continues
to create a significant risk of fraudulent claims for ADF and/or HI-5 tonnages being hauled and/or
diverted. The same contractor has also received warnings from the State Health Department that its
stockpile of crushed glass exceeds the limits of its DOH permit.
DEM did include certain control measures in RFP #2299. "Collection of Recyclable Materials from
Solid Waste Convenience Centers." However, it has not implemented RFP Specification No. II.K.3
which provides: "County will record container numbers of Contractor's containers while they are at the
transfer station and the commodity being collected in each container, and will record when a
n container has been traded out for another." DEM advises that this control is not in place because not
u all convenience centers are staffed. Instead, a DEM employee inspects multiple transfer stations
each morning and reports fill status by bin number to the respective County baseyard. The baseyard
then reports the same information to the Solid Waste Division account clerk, who records it on a
master status report that is faxed to the vendor by 10 a.m. for notification as to which bins need to be
picked up. DEM indicates that random reconciliation of DEM's internal logs against vendor weight
tickets and billings was performed for July 2008. The Auditor reviewed the sample reconciliation
documents submitted by DEM for the day of July 16, 2008, and found numerous discrepancies with
,~JI some of the bins reported as full on that date not logged as having been picked up through the end of
the month.
a DEM has also not implemented RFP Specification No. II.C.3.1, which provides: "Conduct all
contracted work activities only during regular transfer station operating hours unless prior written
approval from the County is received." The purpose of this control is to provide visual verification of
contractor activities. Instead, review of contractor weight tickets shows frequent activity outside
regular operating hours, sometimes at 3 and 4 a.m., with no evidence of written approval from the
County. Upon inquiry, the Recycling Coordinator stated that she had given the vendor verbal
authorization, but had not followed up with written approval.
Failure to enforce the foregoing contract specifications for documentation of bin collection and
conduct of work activities combine to create an environment open to abuse or fraud.
General Findings Recommendation #7
We recommend that DEM include accurate descriptions and measurements of the volumes of
specific waste types to be processed under each procurement and contract document, as well as
specific requirements for diversion, recycling, and/or reuse of waste types under each procurement
a and contract document.
13
RECOMMENDATIONS - GENERAL FINDINGS
EM Response
i
The Department's new procurements including any Request for Proposal (RFP) and Invitation to Bid a
(IFB) will include the volumes of waste based on the current Solid Waste Disposal Summary reports
or other data.
LAO Follow-up
The maiority of new RFPS and contracts reviewed during our follow-up review more clearly delineated
specific commodities, volumes, and requirements for diversion recycling and/or reuse. However,
DEM continues to lack sufficient controls to ensure that diversion weights claimed are factual
a
accurate, and claimed only once.
a
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RECOMMENDATIONS - DIVERSION GRANT PROGRAM
RECOMMENDATIONS - DIVERSION GRANT PROGRAM
Diversion Grant Program Recommendation #1
We recommend that the County obtain a legal opinion regarding the award of grants and grant
n contracts by County agencies and the applicability of HRS §103D-102(b)(2)(A), Hawai'i County Code
ILJ~ chapter 2, article 25, and other statutory, code, and charter provisions. Policies should be updated as
necessary to ensure compliance with State and County procurement and other applicable laws.
More specifically, the auditors would recommend a legal opinion be obtained regarding the
issuance of grant monies by County departments and agencies to non-profit and for-profit
entities since the majority of diversion grants awarded by the Department of Environmental
Management have historically been to for-profit entities.
DEM Response
It was determined that grant monies may be awarded to non-profit entities. Since the Diversion
Incentive Grant Program awarded funds to both non-profits and for-profit entities, the decision was
made to conduct procurement for these services through the County Purchasing Division. The
Department Director hired consultant, Rifer and Associates to assist in the development of
a procurement documents including the Request for Proposal (RFP) to replace the "Diversion Grant"
program. The result was Request for Proposal #2298 and Invitation for Bid #2299.
LAO Follow-up
Use of the RFP process to procure services appears to have addressed two main issues:
compliance with State procurement law and legal authority of an administrative department to "grant
a funds" whether to a non-profit or for-profit entity.
However, one professional services contract awarded to a consultant for an "Electronic Waste
Recycle Education Program" actually paid for recycling and diversion of electronic waste.
Specifically funds were paid to a non-profit entity that subcontracted with a for-profit entity for
diverting ewaste from County landfills. While the subcontractor has done an exemplary job, funds
were awarded for public outreach and education. Based on invoices submitted, the County should
have submitted the program to IFB/RFP procurement for recycling and diversion services.
a Diversion Grant Program Recommendation #2
We recommend that the County review the issues of "conflict of interest" and "related party
O transactions" adopting any necessary revisions to the County Code in order to reduce the risk of
abuse and/or fraud or perception of impropriety by the public.
DEM Response
a We agree and recommend that this issue be taken up with the Mayor's office and County Council.
LAO Follow-up
Certain RFP documents included basic conflict of interest clauses as follows: "Vendors participating
in the program must disclose anV interest they have in the end market user of the commodity
diverted. If the vendor has an interest in the end market user, a document stating the extent of the
interest in the end market user must be submitted with all Claim Reports, failure to do so would result
in exclusion of those commodities from calculations of payments to the vendor. In the event that the
a 15
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RECOMMENDATIONS -DIVERSION GRANT PROGRAM a
processor and the end market user are the same entity or substantially related entities end market
weight scale tickets must be obtained at an independent third party certified weight scale." However,
this clause may be too limited to adequately address the need for an "arm's length transaction " that a
is, a transaction between two parties with shared interests who act independently as if otherwise
unrelated or unaffiliated.
In one contract, the vendor lists no "conflicts of interest," vet the end-market user states on its website n
that it had financed the vendor's processing facility and equipment and the vendor's vice president ( f
was a former employee of the end-market user. As such the vendor should have disclosed its
affiliated party relationship and DEM should have implemented additional and/or alternative controls
to minimize the risk of abuse, fraud or collusion. In discussions with DEM managers the Solid
Waste Division Chief indicated that he was aware of the affiliated party relationship (but felt it was
more important to implement the diversion program than to worry about the risk related to that
relationship. While DEM's commitment to provide the benefit of these services is commendable it is
not acceptable for the County to ignore State procurement law or its responsibility to (provide public
programs and services in a fiscally prudent and accountable manner.
In discussing implementation of internal controls to reduce the acknowledged risks of
"related/affiliated party" relationship between contractors and end-market users) (as well as
commodities being weighed and claimed more than once) the "Tone at the Top" communicated by
the Solid Waste Division Chief and Recycling Coordinator was that providing diversion and recycling a
services was more important than "worrying about the lack of controls we don't have the manpower to
implement." Again while the Auditor agrees that there are significant environmental social and
operational benefits to diverting commodities from the County's waste stream CountV'government is
not relieved of its responsibility to provide public programs and services in a fiscally prudent and a
accountable matter.
Diversion Grant Program Recommendation #3
We recommend that DEM establish a standardized policy pertaining to program file documentation,
a
including:
• Documentation of all communications, including, but not limited to, letters, a, mails,
notes, and/or documents received and generated by the department regarding all
actions taken to resolve any violations and/or discrepancies that may occur during a
contract period.
• Documentation of the review and reconciliation of the contractor claims reports a
including, for example, a checklist indicating that scale tickets were reviewed for
errors, totaled and reconciled as to tonnage invoiced, and that any deviation from
contract requirements was duly authorized.
• Documentation and reporting of vendor performance.
DEM Response n
Please refer to the response in Chapter 2. General Findings, Recommendation #2 (page 5). u
LAO Follow-up a
Contract files reviewed were well-organized, with only minor exceptions as to c mpleteness of
contract and claims report documentation. Implementation of a stamp-and-signature procedure to a
indicate review of claims reports and approval of payments was noted without exception. However
16
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RECOMMENDATIONS - DIVERSION GRANT PROGRAM
D as discussed above. DEM's ability to reconcile and/or independently verify claimed tonnages remains
an issue in certain contracts.
D
D Diversion Grant Program Recommendation #4
We recommend that DEM ensure the timely procurement of its contracts so that a valid contract is
issued prior to commencement of work. A spreadsheet or other type of tracking system needs to be
D utilized to assist in monitoring of timelines for procurement and contract related tasks.
DEM Response
D Working closely with the County's Purchasing Division to follow this recommendation. DEM Business
Services Section has an open recruitment for a position for Contracts Clerk to assist with these
activities. Although the Department notes that the County has implemented a hiring freeze, the
D Department will work closely with the Mayor's office to acquire approval for filling this position.
LAO Follow-up
D Of the16 contracts and supplements reviewed that included specific contractual start- and end-dates.
12 were signed after their contractual start-dates. One purpose of written contracts is to specify the
rights, protections, and responsibilities of the parties and the deliverables, benchmarks, and timelines
D for performance bV the parties. Therefore, permitting a vendor to perform work without an executed
contract exposes the vendor and the County to liability issues and monetary risks. We strongly
recommend that all contracts be fully executed prior to commencement of work or services and that
departmental procedures related to contracting be implemented to minimize delays in the contract
D execution process.
D Diversion Grant Program Recommendation #5
We recommend that DEM review all contracts to ensure the accuracy and completeness of each
D contract. There should be no sections left incomplete within any contract. Every effort must be made
to ensure that each contract is complete before execution and that program files contain at least one
copy of the contract in its entirety.
D DEM Response
We are working closely with the County Purchasing Division to follow this recommendation. DEM
D Business Services Section has an open recruitment for a position for Contracts Clerk to assist with
these activities. Although the Department notes that the County has implemented a hiring freeze, the
Department will work closely with the Mayor's office to acquire approval for filling this position.
D LAO Follow-up
No exceptions as to completeness of contracts were noted.
D
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RECOMMENDATIONS - DIVERSION GRANT PROGRAM
Diversion Grant Program Recommendation #6
We recommend that the County and DEM consider whether a dedicated personnel position is
warranted to be tasked with the responsibility to: i
• Ensure that the procurement process is begun and completed in a timely manner.
• Research industry best practices, establish benchmarks, and design progra requirements a
and controls.
Ensure that all procurements are made in accordance with State and County procurement a
codes.
• Ensure that procurement documents (RFPs, IFBs, etc.) and contracts contain sufficient
controls and protections.
• Update the department and its contractors as to applicable federal, State, and County a
permitting and regulatory requirements.
• Monitor and report on contractor performance and compliance with contractual land regulatory
requirements on an ongoing basis.
DEM Response
i
We are working closely with the County Purchasing Division to follow this recommendation. DEM a
Business Services Section has an open recruitment for a position for Contracts Clerk to assist with
these activities. Although the Department notes that the County has implemented a hiring freeze, the
Department will work closely with the Mayor's office to acquire approval for filling this position.
LAO Follow-up
The maioritV of new RFPs and contracts reviewed during our follow-up review more clelarly delineated a
specific commodities, volumes, and requirements for diversion, recycling, and/or reuse. However,
DEM continues to lack sufficient controls to ensure that diversion weights claimed are factual
accurate and claimed only once. A formal checklist is recommended to ensure that all contracts O
contain sufficient specifications, performance expectations, and protections.
Diversion Grant Program Recommendation #7
We recommend that DEM review current contracted operations to identify areas of control
deficiencies that increase the risk of contractor abuse and/or fraud, and implement corrective
measures to ensure accuracy of claims and fiscally responsible use of grant monies.
• Grant Guidelines and contracts should be revised to standardize the minimum information
requirements for vehicle identification, tare weights, and scale tickets, and require the
weighing of trucks before and after hauling of any commodity to ensure adequate weight
verification.
• The department should investigate mechanisms for accurate ongoing measurement of waste 0
stream volumes to provide for:
c Independent verification of current diversion claims. a
16
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RECOMMENDATIONS -DIVERSION GRANT PROGRAM
D o Ability to more accurately assess waste stream volumes to be processed for future
diversion contracts.
D o Better data for benchmarking, long-term planning, and public education.
D DEM Response
We are working closely with the County Purchasing Division to follow this recommendation. DEM
Business Services Section has an open recruitment for a position for Contracts Clerk to assist with
D these activities. Although the Department notes that the County has implemented a hiring freeze, the
Department will work closely with the Mayor's office to acquire approval for filling this position.
D LAO Follow-up
Minimum weight ticket information requirements were noted in the procurement documents reviewed.
However, as discussed above improved internal controls for measurement of waste types diverted
D from landfills and independent verification of contractor claims for recyclables remain outstanding.
D
D
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D
RECOMMENDATIONS - ADF-GLASS CONTAINER RECOVERY PROGRAM u
RECOMMENDATIONS - ADF-GLASS CONTAINER RECOVERY PROGRAM D
ADF Glass Container Recovery Program Recommendation #1
We recommend that the County obtain a legal opinion as to whether the ADF and Diversion Grant
programs are, in fact, exempt from the State procurement code under HRS §103D-102(b)(2)(A).
DEM Response
Please refer to the response in Chapter 3, Diversion Grant Program, Recommendation #2 (page 10).
Contracts that include payments for ADF glass diversion were awarded in 2007 to all the entities that
submitted a proposal including, Atlas Recycling, Business Services Hawaii and Club Shoyu.
LAO Follow-up
This recommendation and related finding are no longer applicable since DEM no (longer "grants
funds" for its recycling/diversion programs and now procures services through the Purchasing
Division. As such, the Finance Department's "General Terms and Conditions for Goods and
Services" were incorporated in all contracts reviewed without exception.
ADF Glass Container Recovery Program Recommendation #2 D
We recommend that the County amend its Code to clearly establish its authority to audit any entity 0
with which it contracts, regardless of whether the procurement is subject to or exempted from State
and County procurement code provisions.
• Language should include clarification that an audit entails more than a review of documents a
and records. For example, it may include, but should not be limited to ,1 inspection of
contractor premises, processes, controls, and records. Consideration should be given to
language contained in HAIR §3-122-166 and §3-122-167.
• The County needs to review and develop rules and conditions applicable to procurements
exempted from State and County procurement codes, and address possible gaps in
remedies and protections normally afforded under the "General Rules and Conditions" of the a
codes.
DEM Response
We agree and have incorporated this language in the Diversion Incentive Contracts issued in 2007,
specifically Request for Proposal (RFP)# 2298 and Invitation to Bid (IFB) # 2299.
LAO Follow-up
As stated earlier, a maiority of contracts now contain a "right-to-audit" clause.
ADF Glass Container Recovery Program Recommendation #3
We recommend that the County incorporate into all contracts exempted from State and County
procurement codes, excerpts from the "General Terms and Conditions" of said codes which afford the
County better protections and remedies against collusion, abuse, and fraud without subverting the
flexibility intended by the exemptions. For example, Section 4, "Performance of Contract," contains
20 a
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RECOMMENDATIONS -ADF-GLASS CONTAINER RECOVERY PROGRAM
language that permits the procurement officer or purchasing agency to reserve its right to suspend a
contractor from bidding on any or all County contracts with due cause.
DEM Response
We agree and will include this in any future contracts that are awarded and exempt from State and
County procurement codes.
LAO Follow-up
This recommendation and related finding are also no longer applicable since DEM no longer "grants
funds" for its recycling/diversion programs and now procures services through the Purchasing
Division. As stated above the Finance Department's "General Terms and Conditions for Goods and
Services" were incorporated in all contracts reviewed without exception.
ADF Glass Container Recovery Program Recommendation i/4
We recommend that DEM revise Grant Guidelines and subsequent monitoring practices to ensure
accuracy of contractor claims and to reduce the risk of errors, abuse and/or fraud.
n • Require that all contractor reports of diverted source streams be quantifiable and verifiable.
Include specific language delineating the County's right to audit contractor records and
LJ operations and to conduct random inspections of contractor operations for the purpose of
verifying claims and delivery to end markets.
Include specific language addressing related party transactions, defining who qualifies as a
"related party", requiring related party disclosures, and delineating additional documentation
and control procedures required for related party transactions, contracts, and subcontracts.
Require submittal of a process flow plan for each recycling facility, including measurement
procedures for inflow sources, segregation of non-program eligible materials, and verification
of end market user deliveries.
Clarify that contractor documentation of its buy-back incentive payments to the recycling
public will be required, specifying acceptable documentation such as signed receipts.
a • Clarify that contractor documentation of its program development efforts will be required,
specifying acceptable documentation such as newspaper ads, educational literature
distributed, and testimonial letters from participating community groups.
• Monitor and enforce grant and contract requirements.
ry o DEM needs to develop a comprehensive monitoring and control plan for all programs. If
1L JI sufficient controls are "built in" at the IFB, RFP, grant guideline, and contract phases, the
burden of operational oversight, monitoring and inspection can be reduced. This is not to
say that additional personnel may not be required to implement the necessary oversight
and monitoring procedures.
n DEM Response
r This section is the ADF-Glass Container Recovery Program which has been a focus of concern and
LI has received public complaints. Prior to the Deposit Beverage Container Program (aka H15) the only
21
RECOMMENDATIONS - ADF-GLASS CONTAINER RECOVERY PROGRAM
State subsidized program for glass was the Advanced Disposal Fee (ADF) as defined in HRS VJ
Chapter 342G-81 Advance disposal fee. Beginning in October 2004, the glass advance disposal fee
only applied to glass containers that are not part of the glass deposit beverage containers (H15). The n
result was a substantial reduction in the ADF funds available for County programs. For example in ~LJI
2003 our County received $298,000 and it decreased in 2007 to $56,879. The other result is that the
majority of the glass recycling in the County is managed and paid directly by the State through the
H15 Program. The County manages the smaller portion of the glass recycling through the ADF
program.
In the State Department of Health's Office of Solid Waste Management's REPORT TO THE
TWENTY-THIRD LEGISLATURE STATE OF HAWAII 2006 dated December 2005 is states "The
OSWM administers a statewide glass recovery program that is funded through an advance disposal
fee (ADF). The department collects the fee from distributors of products contained in glass
containers. The department then contracts with each county to establish glass buy back programs n
that divert glass from the waste stream and direct it to recycling. As directed by statute, the funds are )LJ~
distributed to the counties based on de facto population. Each county is allowed enough flexibility to
structure its glass-recycling program to maximize recycling of the glass.
The Glass ADF Program has been directly affected by implementation of the Container Deposit D
Program. Beginning October 1, 2004, glass beverage containers were transferred from the purview of
the ADF program to that of the Deposit Beverage Container Program, and redemption of deposit
containers began on January 1, 2005.
In FY 2004-05 the transfer of glass beverage containers to the deposit program reduced the number
of containers covered by the ADF Program by approximately 55%, with a corresponding decrease in n
program revenue. The start of redemption for deposit containers also affected ADF recovery rates, as ILJ{
recyclers had to adjust their operational procedures in order to segregate ADF product from DBC
product.
The department has reduced the amounts of the county contracts in accordance with the decrease in
program revenue. Current year (FY2005-06) funding has been reduced by 25%. The department
expects ADF revenue to continue its decline through at least the FY2005-06 year before stabilizing.
Projections indicated that annual revenue might fall below $1 million. The department will continue to
analyze the impacts of the DBC program on the ADF revenue and recovery rates to determine when
equilibrium between the programs has been reached. The department will make whatever
adjustments necessary to optimize program performance. . , I
We also note that a transfer of $2,000,000 was made in December 2004 from the lEnvironmental
Management Special Fun (Advanced Glass Disposal Fee portion) fund to the general fund in
accordance with Act 52 of the 2004 legislature." t }
The bottle bill legislation, Deposit Beverage Container Program, HRS Chapter 342G-101 through 123 ILJI
has increased recycling in the County dramatically for glass as well as plastic and aluminum
beverage containers. In 2008, our County had achieved the highest redemption rate in the State -
90%. However, it has also complicated glass recycling in that there are now two different funding
programs, ADF Glass and DBC (H15) Glass. Even with the one program, ADFI Glass, it was
challenging to implement procedures that would prevent recyclers from weighing the same glass
multiple times. Now, the challenge is even greater, in as much as the recycler has to maintain
records separately for ADF and DBC glass containers. They also must maintain records separately
for the "end-market" uses of the glass.
The County currently has three (3) recyclers participating in the DBC program, Atlas Recycling,
Business Services Hawaii and Reynolds Recycling. Atlas and Reynolds are also participating as
Certified Redemption Centers (CRC). Business Services currently is not a Certified Redemption
Center and has a sub-contract agreement with the Arc of Hilo who provides the Certified Redemption
Center services. In addition, there are three companies participating in the County's ADF Glass
22
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RECOMMENDATIONS -ADF-GLASS CONTAINER RECOVERY PROGRAM
Recycling through RFP #2298 which include Atlas Recycling, Business Services Hawaii and Club
Shoyu. Also, Business Services Hawaii was the sole bidder for IFB #2299 to provide the collection
and hauling of the bins of glass containers as part of the County's 2-Bin Recycling Program.
The audit sites that they were allowed to make a site visit to the Atlas Recycling Facility in Hilo and
a observed their operation. In the report it was also noted that based on a discussion with Mr. Peter
Bloom, DOH Environmental Health Specialist noted 'He has a random basis reconciled the
residential redemption receipts to Altas' H15 weight claims and found no material exceptions.
However, he further indicates that since Atlas reports/claims H15 containers collected from
commercial sources for which no deposit refund is paid and no record of incoming weight is
U generated, verification that ADF glass is not included in H15 claims in not possible.
The audit sites that they were denied access to make a site visit to Business Services Hawaii at the
date and time requested. It is unclear as to whether Business Services Hawai'i was willing to give
access to their site or records at an alternate date and time. Since Business Services is not a
n Certified Redemption Center, the submission for payment by the State is through Am of Hilo.
I The County reconciles the invoices submitted by the companies participating in the ADF programs,
verifying that the calculation of the weights is accurate and that the end-market weights reconcile.
Recently, the County has implemented another reconciliation procedure for Business Services Hawaii
for their submission of invoices for IFB#2299. This Invoice Verification Report (Refer to Attachment
"D") reconciles the Solid Waste Division's Status of Recycling Bins at Transfer Stations report (Refer
to Attachment "E) with the BSH invoice. The County does not have full-time staff at each Transfer
Station to monitor the recycling activities and track the hauling of the recyclables. The procedure is
that the Transfer Station Attendants (TSA) are required to report to their baseyard the recycling bin
number and the status of the recycling bins as to one of following; full, X full, % full, full, full or
overfull. This information is transmitted to the Solid Waste Division Administrative Assistant. In a
D random audit of July 2008, the invoice was verified that on the date BSH submitted a weight ticket,
the same bin number matched the Division's report. The Division is reviewing its staffing resources to
determine if this step can be implemented as part of a monthly invoice reconciliation procedure.
n The issues of weighing, stockpiling and appropriate end uses for recycled glass are State-wide and
IL JS on-going. The DOH had a meeting in June 2008 to discuss these issues and proposed changes to
their rules/policies regarding glass recycling. As a result, DOH changed the rules to increase
payment for glass used for remanufacturing which does not exist within the State requiring that it
must be shipped. Atlas Recycling ships the majority of the recycled glass it collects to a
remanufacuurer (Strategic Materials). Club Shoyu reuses its glass bottles and Business Services
uses the recycled glass on-island for construction and fill materials. The new DOH changes will
reduce the payment for these types of on-island end-uses. The County Solid Waste Division
Engineer has been actively working with local contractors and the construction industry to develop
on-island use of recycled glass in place of mining native aggregate. (Refer to Attachment "F" Letter
to DOH from SWD Engineer, Terin Gloor).
a LAO Follow-up
Please see our discussion at Recommendation No. 6 - General Finding related to improvement of
internal controls for measurement and independent verification of contractor claims for ADF glass. As
stated above while the majority of new RFPs and contracts reviewed during our follow-up review
more clearly delineate specific commodities volumes and requirements for diversion recvcling
and/or reuse DEM continues to lack sufficient controls to ensure that weights claimed are factual,
accurate and claimed onlV once.
23
RECOMMENDATIONS - ADF-GLASS CONTAINER RECOVERY PROGRAM
ADF Glass Container Recovery Proaram Recommendation #5
We recommend that DEM review its ADF program for glass source streams that are not currently y
being measured, and implement corrective actions to provide greater accountability without causing ILJI
undue hardship to contractors or Count
y personnel in their application. i
DEM Response
The Department believes that the cost and time to implement this recommendation isi not warranted
at this time. a
LAO Follow-up
As discussed above without the basic ability to accurately and independently measulre waste flows
by type an accurate assessment of the County's recycling/diversion efforts cannot be performed.
ADF Glass Container Recovery Program Recommendation #6 u
We recommend that DEM determine whether additional positions will be required to meet timelines
for procurement and contract issuance and to conduct necessary oversight and monitoring of
contractor performance under procurement and contract agreements.
DEM Response
We are working closely with the County Purchasing Division to follow this recommendation. DEM
Business Services Section has an open recruitment for a position for Contracts Clerk to assist with
these activities. To implement sufficient oversight and monitoring of contractor performance may
require the addition of operations staff. The Department has recently discussed the possibility of
using cameras and other new technology for monitoring of the recycling activities of its contractors.
The cost of acquisition of this type of software and/or equipment compared with the additional t~
personnel costs needs to be analyzed. Also, to be determined is the risk assessment and the ?LJI
cost/benefit analysis. Although the Department notes that the County has implemented a hiring
freeze, the Department will work closely with the Mayor's office to acquire approval for filling the
Contracts Clerk position.
LAO Follow-up
As discussed above no evidence of an organizational re-evaluation was presented to support DEM's
a
request for additional personnel following our original audit report. I
i U
ADF Glass Container Recovery Program Recommendation #7
We recommend that DEM research utilizing the project accounting module of the Colunty's FRESH
accounting system to assist in more efficient financial monitoring and reporting.
DEM Response f~
The Department's Business Services Section has determined that the project accounting module of IUI
the County's FRESH accounting system is not the best application for monitoring and reporting on
our recycling programs.
24
I
L~1
RECOMMENDATIONS -ADF-GLASS CONTAINER RECOVERY PROGRAM
1__I
LAO Follow-up
Please see our discussion at Recommendation No 3 - General Findings related to implementation of
a contract tracking system.
a
ADF Glass Container Recovery Program Recommendation #8
We recommend that DEM develop a formal policy and procedure for authorization, documentation,
1J and systematic recordation of changes to its contracts and budgets.
a DEM Response
We agree with this recommendation and are currently reviewing issues specific to our Department
that would affect such a policy and procedures.
LAO Follow-up
Q Improved documentation of contract authorizations contract amendment requests, and contract
changes was noted.
ADF Glass Container Recovery Program Recommendation #9
Q We recommend that DEM establish a formal policy and procedure whereby financial status reports at
contract and program levels are regularly and timely provided to and monitored by a designated
budget responsible manager within the department.
r y DEM Response
ILJf We agree with this recommendation and are currently reviewing issues specific to our Department
that would affect such a policy and procedures.
a LAO Follow-up
O Please see our discussion at Recommendation No 3 - General Findings related to implementation of
contract and program tracking systems.
ADF Glass Container Recovery Program Recommendation #10
We recommend that DEM obtain specific written clarification from DOH as to whether its "glasscrete"
projects will satisfy all or portions of the "glassphalt" paving requirement under HRS §342G-86(a)(2).
DEM Response
§342G-81 Definitions states "Glassphalt" means an asphaltic concrete mixture utilizing crushed glass,
under controlled gradation conditions, as a substitute for a percentage of the aggregate in the mix.
Based on this definition, we would interpret that the "glasscrete" projects are acceptable for the same
reason that they are utilizing the recycled glass and protecting natural resources by substituting glass
for raw materials normally used. A confirmation from the State Department of Health has been
requested and is pending.
a 25
0
RECOMMENDATIONS -ADF-GLASS CONTAINER RECOVERY PROGRAM
ADF Glass Container Recovery Program Recommendation #11
We recommend that DEM work closely with DOH and other counties to address data deficiencies and
possible solutions such as, reporting of ADF glass imported or manufactured at both the county and
State levels.
• DEM should implement the necessary procedures to obtain accurate estimates of a
volumes to be processed.
DEM Response
This is a valid recommendation that will be implemented when appropriate staff and funding are
available.
LAO Follow-up
DEM should devise other means to ensure that the same glass is not claimed multiple ltimes or under
both the ADF and H15 programs Please see our discussion at Recommendation No 6 - General
Findings related to independent verification of diversion claims and segregation of ADF and HI-5
tonnages from diverted glass tonnages n
2J
ADF Glass Container Recovery Program Recommendation #12 tn~
We recommend that DEM further research the history of ADF accounting within the State LJ
Environmental Management Special Fund and inquire: n
• How were annual allocations to the counties calculated? 1
DEM Response ttIJJJ
Annual allocations to the counties were made based on population.
• How and why was a surplus accumulated if counties needed to supplement ADF
programs with their own funds?
DEM Response (updated 219109)
In December 2007 DOH issued their Annual Solid Waste Management Report which included the O
explanation of the Glass Advance Disposal (ADF) Program (Refer to Attachment "G" r State Annual
Solid Waste Management Report). In 2003, the total allocations were $2,265,000 with Hawai'i
County allocated for $283,000 or 13%. Beginning October 1, 2004, glass deposit beverage
containers were transferred from the purview of the ADF program to that of the Deposit Beverage
Container (DBC) Program. This reduced the number of containers covered by the ADF program by
approximately 80% and brought with it a corresponding decrease in revenue, thereby reducing the
allocations to each County. By 2007, the total allocations were reduced to $454,080 with Hawaii
County allocated approximately $56, 000.
• Why were surplus funds transferred to the General Fund when ADF funds were
insufficient to cover ongoing glass recovery?
i
26
L~
RECOMMENDATIONS-ADF-GLASS CONTAINER RECOVERY PROGRAM
DEM Response
As a result of the reduction in the allocations from the State ADF Glass funds, the County subsidized
glass recycling to maintain the recycling of non DBC glass and to increase diversion of glass from the
landfills.
a LAO Fallow-up
This recommendation was made in reference to the severe cut in annual allocations to the Counties
following the reallocation of $2 million from the State Environmental Management Special Fund to the
u State General Fund by the Governor in 2004 The Auditor requested a breakdown of County General
Fund versus State funding sources for ADF expenditures for the last five years However, as of
Q March 18, 2009, DEM has not provided the requested information.
a ADF Glass Container Recovery Program Recommendation #13
We recommend that the department and the County address issues created by the severe reduction
or possible discontinuation of State funding for the ADF program.
DEM Response
Please refer to the response to Chapter 3 - ADF Glass Container Recovery Program,
Recommendation No. 4, (pages 13- 16).
LAO Follow-up
DEM's response should discuss how the ADF program is currently being funded based on reduced
funding from the State.
D
Q
a
c
27
0
RECOMMENDATIONS - HI5 - BEVERAGE CONTAINER DEPOSIT PROGRAM
RECOMMENDATIONS - HI5 - BEVERAGE CONTAINER DEPOSIT PROGRAM
HI5 - Beverage Container Deposit Program Recommendation #1
We recommend that DEM work with DOH to establish certified redemption centers lin those areas
currently unserved or under-served as required by HRS §342G-113(d) and/or HAR §11-282-62(a).
DEM Response I Q
We have been working closely with DOH and the County Certified Redemption Centers. Service is
now daily (7 days per week) in Hilo. Atlas Recycling now offers "mobile redemption centers" for the
rural communities in Ocean View and Na'alehu. Reynolds Recycling recently acquired a truck
equipped with a Reverse Vending Machine and has done redemption activities at rural sites around
the island. We plan to open a redemption center at the Volcano Transfer Station and increase the
frequency of service in Hawi. Kadota Liquors in Hilo was recently awarded grant monies to purchase
Reverse Vending Machines and construction at the future Certified Redemption Centers (CRCs) is
currently under way. Other private companies are currently looking at other underserved areas for
future sites.
HI5 - Beverage Container Deposit Program Recommendation #2
We recommend that DEM work with other counties and DOH to assess current program deficiencies
at all levels and to formulate countermeasures and procedures to address them.
DEM Response
Prior to the County of Maui and Kauai losing their HI 5 staff, quarterly meetings were held on Oahu or
by teleconference for all Counties. County of Hawaii staff is still in contact with DOH and other
Counties by email or phone to discuss any matters regarding the Bottle Bill Program. DOH
inspectors make quarterly redemption site and/ or retail inspections to the Big Islandi where matters
are further discussed. n
HIS - Beverage Container Deposit Program Recommendation #3
We recommend that DEM work more closely with ARC to ensure that sufficient control mechanisms
are in place and that regular review and reconciliations are performed to confirm accuracy of data
collected and reduce the risk of contractor errors or abuse.
DEM Response
County of Hawaii Bottle Bill staff does monthly inspections of Certified Redemption Centers (Refer to
Attachment "H" - CRC Site Visit Summary) located on the Big island and meets with the Arc of Hilo
as-needed to improve service and discuss any matters regarding the Bottle Bill Progl am. A master
internal checklist was created and any discrepancies require resolution prior to approving invoice
payments.
LAO Follow-up 7 7
Please see our discussion at Recommendation No 6 - General Finding related to improvement of
internal controls for measurement and independent verification of contractor claims for H15-beverage U
containers. While the majority of new RFPs and contracts reviewed during our follow-up review more
clearly delineate specific commodities, volumes and requirements for diversion reicycling, and/or r~
28
it
L~
RECOMMENDATIONS - HI5 - BEVERAGE CONTAINER DEPOSIT PROGRAM
a reuse DEM continues to lack sufficient controls to ensure that weights claimed are factual accurate,
and claimed onlV once. 11
HI5 - Beverage Container Deposit Program Recommendation #4
D We recommend that DEM continue to support ARC'S efforts to make transfer station redemption
centers and public participation projects more convenient and user-friendly.
DEM Response
We have been working closely with DOH and the Arc of Hilo to improve the customer experience.
Q The County sought and was awarded additional funds in FY07-08 to provide glasscrete pads at the
Certified Redemption Centers. For FY08-09; the County was awarded funds to provide more
attractive, substantial structures for the Certified Redemption Centers at transfer stations. In FY07-
08, the Arc of Hilo adjusted the amount of cash each Certified Redemption Center is given so that the
Q majority of redemption payments can be paid in cash instead of vouchers, improving customer
service.
j~ HI5 - Beverage Container Deposit Program Recommendation #5
u We recommend that DEM prepare a master internal check list/review form to accompany contractor
payment requests. This form should be modified as needed to reflect specific documentation and
reconciliations required for a particular program or contract.
DEM Response
D The County has two (2) Recycling Specialist ll positions funded by the H15 program. Currently, there
is a vacancy for one position. Although, the County has implemented a hiring freeze, because this
position is funded by State Grant funds, we anticipate approval of the position so the County will not
n lose momentum in this very successful and popular diversion program. As recommended by the
ll audit, the Department's Recycling Section developed an invoice checklist for the invoices submitted
by the Arc of Hilo to verify that the contractor has submitted all the required documents and reports
D prior to approving payment of the invoice. (Refer to Attachment "I" - Arc of Hilo Invoice Checklist).
HI5 - Beverage Container Deposit Program Recommendation #6
We recommend that the County Council clarify by ordinance the County's authority to audit any and
all of its procurement contracts including any sub-tier contracts.
D DEM Response
We agree with the recommendation and suggest that the County Council consult with the Finance
a Department on this matter.
LAO Follow-up
The majority of contracts reviewed now contain a "right-to-audit" clause.
a 29
a
R ECOMMENDATIONS - GREEN WASTE PROGRAM
I
RECOMMENDATIONS - GREEN WASTE PROGRAM D
Green Waste Program Recommendation #1 r
We recommend that a cohesive vision be developed to address solid waste management in Hawai'i U
County, including input from the general public, Environmental Management Commission,
Department of Environmental Management, the Mayor, and the County Council. The Updated
ISWMP needs to be revised to reflect this vision. Most importantly, a "working plan" needs to be
developed to supplement the County's Updated ISWMP that addresses, at a minimum, a detailed
task schedule and implementation of a formal process for frequent progress review. a
DEM Response
The County of Hawaii is currently updating the ISWMP. A cohesive vision will be developed as part
of the plan as a result of obtaining input from the general public, the Environmental Management
Commission, the Mayor and County Council. The update to the ISWMP will include an
implementation plan and schedule and associated cost to implement the plan.
LAO Follow-up
Although no "new" procurements and contracts have been issued for this particular Droaram since our D
original audit we note that the majority of new contracts issued in other programs contain a "right-to-
audit" clause.
D
Green Waste Program Recommendation #2 n
We recommend that the Hawai'i County Code be amended to address the banning of household and I
commercial green waste from County landfills in accordance with Hawai'i Administrative Rules §11- LJ
58.1-65(b).
DEM Response
The County currently has only three (3) locations that accepts greenwaste for recycling, Hilo, Kona &
Keaau. The County has plans to have a Compost and Biodiesel operation at the West Hawai'i D
Sanitary Landfill in FY08-09. Towards this end, the Department, in conjunction with the Purchasing
Division, developed RFP #2481. At the same time that RFP # 2481 was is issued, another RFP
#2479 was issued for establishment of greenwaste collection sites at transfer stations! Evaluation of
both RFPs is underway as of this writing. The Solid Waste Division has plans to modify the solid
waste regulatory permits for the convenience centers (aka transfer stations) to allowl acceptance of
greenwaste. Once greenwaste recycling collection sites are established at more communities, the
plan will be to pursue banning greenwaste from the transfer stations and landfills. r
TL 11
LAO Follow-up
We noted no documentation of a cost-benefit analysis comparing in-house collection lot green waste D
I from transfer stations versus outsourced collection of green waste from transfer stations or a cost-
benefit analysis comparing in-house collection and processing of green waste versus outsourced
collection and processing of green waste. If the County's goal is to move as close as possible to zero
waste, then recycling and diversion of green waste is an ongoing need and warrants consideration of
the most cost-effective method of providing these services.
D
30 D
D
RECOMMENDATIONS -GREEN WASTE PROGRAM
Green Waste Program Recommendation #3
a We recommend that Landfill operation plans need to be updated in accordance with current statutory
and regulatory requirements and the County's Updated ISWMP, and communicated to landfill
management, operations personnel, contractors, and the general public.
DEM Response
The South Hilo Sanitary landfill operation plans were updated and were made part of the permit
0 submittal as required to the State Department of Health. The West Hawaii Sanitary Landfill
operation plans were updated as part of the permit renewal submitted by Waste Management to the
State Department of Health. These will be communicated to operations personnel when the permits
are approved and issued by the State Department of Health.
LAO Follow-up
Q As part of its response DEM should establish a plan and procedure to ensure timely and ongoing
notification and education of landfill management operations personnel, contractors, and the general
public of landfill permit and other regulatory changes.
Green Waste Program Recommendation #4
a We recommend that DEM develop and implement formal policies and procedures for responses to
any and all regulatory agency warnings and violation notices, including to whom and when these
warnings and notices should be communicated, and procedures to ensure timely follow up and
resolution.
DEM Response
We agree and have implemented a method to assure timely follow-up with regulatory agency
U warnings. Any notification or warning letter received from the DOH is assigned a numerical number
in MS Outlook and is tracked by the DEM Secretary until an appropriate response or resolution from
a the Department, Division or Vendor. The greenwaste site at the Kealakehe Transfer Station is
inadequate, creating challenges for the contractor to stay in compliance with DOH. DEM is working
closely with the current contractor, EKO, on these issues and communicates regularly with the DOH
on issues of mutual importance.
LAO Follow-up
The Auditor continues to note State Department of Health warning notices regarding contractor non-
compliance with permit requirements.
Q Green Waste Program Recommendation #5
We recommend that DEM determine whether a dedicated personnel position should be tasked with
o the responsibility for monitoring of contracts and contractor compliance. Oversight duties would
include ensuring:
• All procurements are made in accordance with State and County procurement codes.
D 31
a
RECOMMENDATIONS - GREEN WASTE PROGRAM
• All procurement documents (RFP's, IFB's, etc.) and contracts contain sufficient controls and a
protections.
• The procurement process is initiated and completed in a timely manner.
• Compliance with applicable permitting and other regulatory requirements. Q
• Compliance with contractual requirements and evaluation of contractor perform ance.
DEM Response a
We are working closely with the Purchasing Division to follow this recommendation. IDEM Business
Services Section has an open recruitment for a position for Contracts Clerk to assist with these
activities. To implement sufficient oversight and monitoring of contractor performance may require
the addition of operations staff. The Department has recently discussed the possibility of using
cameras and other new technology for monitoring of the recycling activities of its contractors. The
cost of acquisition of this type of software and/or equipment compared with the additional personnel Q
costs needs to be analyzed. Also, to be determined is the risk assessment and the cost/benefit
analysis. Although the Department notes that the County has implemented a hiring freeze, the
Department will work closely with the Mayor's office to acquire approval for filling the Contracts Clerk
position. a
LAO Follow-up
All green waste contracts incorporated the Finance Department's "General Terms and Conditions"
without exception. Improvement was also noted in timely execution of supplements to this contract
o
However, given liability issues and monetary risks all contracts should be fully executed prior to
commencement of work or services.
Green Waste Program Recommendation #6
We recommend that DEM establish standardized internal policies and procedures for program
documentation and reporting. o
• Program file documentation should be complete and current as to any and all intra- and inter-
departmental, regulatory agency, and vendor communications. Program files should also
include a chronology of complaints or violations and documentation of their resolution.
• Program file documentation should be complete and current as to any permits,l reports, plans,
and other program documents submitted by the department or contractors in accordance with
governmental or regulatory agency requirements. Program files should also include a
schedule of what reports are required, when they are due, and to whom they need to be
distributed as well as written procedures detailing source data required for each report and
how data is to be collected and compiled. a
DEM Response
Please refer to response to similar recommendation in the Chapter on General Findings. a
LAO Follow-up
Although contract files for this specific commodity were not reviewed during our follow-uD review.
I
those contract files reviewed showed significant overall improvement in organization and U
32
RECOMMENDATIONS -GREEN WASTE PROGRAM
completeness However, we found no program tracking or "tickler" system to assist DEM personnel
in identifying program and regulatory requirements and deadlines.
D Green Waste Program Recommendation #7
We recommend that DEM establish standardized policies and procedures to permit verification of
contractor claims reports and reduce the risk of fraud and/or abuse including but not limited to:
• Implement necessary policies and procedures to accurately measure in-flow volumes of
u green waste.
a • Delineate information required on scale tickets.
• Require identification of all contractor vehicles, including vehicle description, license number,
and tare weights.
O • Require contractor vehicles to be weighed at a County scale house before and after
deliveries.
a • Place County personnel at processing sites to monitor weighing of unprocessed and
processed mulch.
• Develop a checklist for approval of contractor claims, including review for mathematical
errors, reconciliation with scale tickets, and authorization of any deviation from contract
requirements (i.e.; minimum processing weights).
O • Consult with the Finance Department and Corporation Counsel on the process and
documentation required for removal of contractors from "acceptable vendor" status for non-
performance.
DEM Response
We have developed a new system for verifying the invoices submitted for EKO, the current
O greenwaste vendor and to accurately verify the material weights. Because there is no scale at the
current Kealakehe Site, payment is made on "per load" based on scaled weights of the specific
vehicle. Random (unannounced visits) to obtain weights is being done. The Department's Recycling
Section has developed procedures to verify the invoices for accuracy and required documentation
O (Refer to Attachment "J" Greenwaste Operations Policies and Procedures).
LAO Follow-up
This is an improvement in internal controls. However, current procedures still do not accurately verify
material weights but only verify the number of loads hauled and do not prevent counting of loads
more than once Accurate measurement of all green waste from all sources (household and
commercial) or internal controls to ensure that commodities are weighed only once are necessary to
ensure that the contractor cannot claim more tonnage than it received for processing.
a Green Waste Program Recommendation #8
We recommend that DEM establish standardized policies and procedures for monitoring and
documenting vendor compliance with other contractual obligations including but not limited to:
a 33
LJ
RECOMMENDATIONS - GREEN WASTE PROGRAM
• Review certificates of insurance provided by contractors for accuracy and datesi of coverage.
• Require documentation of advertising efforts undertaken by contractors, including samples of a
promotional and educational materials and invoices from newspapers and other media
sources to confirm their publication and distribution.
DEM Response a
Please refer to the response in Chapter 2. General Findings, Recommendation #2 (page 5). n
LAO Follow-up I !
We note the continuing lack of current documentation of general liability and automobile insurance U
coverage and sufficient documentation of outreach and promotional expenditures. o
Green Waste Program Recommendation #9
D
We recommend that DEM obtain accurate estimates of green waste volumes to be processed for
inclusion in procurement documents.
DEM Response
We have obtain accurate reports from the current contractor, Big Island EKO, as to the volumes of
greenwaste processed in both Hilo and Kona with their monthly invoice. This information was
provided in greenwaste and compost procurements documents developed forFY08-09.
LAO Follow-up D
Without proper controls in place, the accuracy of contractor claims cannot be assured. As with ADF-
Glass Containers and H15-Beverage Containers, independent verification of green waste tonnages at t I
some point in the process needs to be implemented. U
I D
a
a
a
34 O
a
RECOMMENDATIONS - SCRAP METAL PROGRAM
RECOMMENDATIONS - SCRAP METAL PROGRAM
a Scrap Metal Program Recommendation #t
We recommend that DEM ensure that the award entity is a "legal" entity prior to contract award and
that there is sufficient documentation in the program file to explain inconsistencies between the
names of original bidders and names of vendors awarded contracts during the procurement process.
DEM Response
Q The Department understands that Corporation Counsel and the Purchasing Division when reviewing
the contract and approving them are sufficient checks and balances to assure that the award is legal.
DEM does not have the legal expertise to implement this recommendation. We will continue to work
with the Purchasing Division and Corporation Counsel to provide necessary documentation to resolve
inconsistencies.
n LAO Follow-up
lUl The Auditor agrees that this recommendation is more appropriately addressed to the Corporation
Counsel as it relates to all contracts executed by the County.
O
D Scrap Metal Program Recommendation #2
We recommend that DEM ensure that personnel with sufficient training and expertise are assigned to
supervise the contract procurement process, including, but not limited to, preparation of contractor
0 reporting requirements specifying format, content, and frequency of reports.
DEM Response
We are working closely with the Purchasing Division to follow this recommendation. DEM Business
Services Section has an open recruitment for a position for Contracts Clerk to assist with these
activities. Although the Department notes that the County has implemented a hiring freeze, the
a Department will work closely with the Mayor's office to acquire approval for filling this position.
Scrap Metal Program Recommendation #3
We recommend that DEM ensure that personnel with sufficient training and expertise are assigned to
monitor each contract after issuance to ensure departmental and contractor compliance with all
contractual, regulatory, and operational requirements.
DEM Response
Ensuring that personnel with sufficient training and expertise are assigned to monitor each contract to
ensure contractor compliance is an excellent recommendation that will be implemented when
appropriate staff, facilities and funding are available.
LAO Follow-up
Inclusion of sufficient controls at the procurement phase can reduce the number of personnel
required to monitor contracts and programs.
35
O
RECOMMENDATIONS - SCRAP METAL PROGRAM
Scrap Metal Program Recommendation #4
We recommend that DEM ensure that proper permits are obtained prior to any contractor a
commencing work on any contract on any County property.
DEM Response
We agree and have been working with vendors and/orDOH to obtain copies of currentpermits before D
contractor commences work.
Scrap Metal Program Recommendation #5
We recommend that DEM ensure that contractors obtain necessary permitsi and provide a
documentation of work performed before disbursing any County funds.
DEM Response
We agree and have been working with vendors and/or DOH to obtain copies of current permits before D
contractor commences work.
Scrap Metal Program Recommendation #6
We recommend that DEM develop and implement policies and procedures to adequately verify the a
accuracy and integrity of the contractor's claims of scrap metal removed from County storage sites.
At a minimum, policy and procedure should address sealing of disposal containers and end-user
verification that the seals are intact upon receipt of containers.
DEM Response
Developing standard policies and procedures to adequately verify the contractor's claims is an a
excellent recommendation that will be implemented when appropriate staff, facilities Hind funding are
available.
LAO Follow-up n
DEM indicated it is aware that a "related/affiliated party" relationship exists between) the contractor ILJI
and the end-market user that verifies weights of off-island shipments However, as noted in our
discussion at Recommendation No. 2 for the Diversion Grant Program no mitigating controls have
been implemented and no formal written policies and procedures on this issue have been developed
and communicated to staff.
a
Scrap Metal Program Recommendation #7
We recommend that DEM address any warning letter received from DOH-SHWB or any other
regulatory agency in a timely manner to avoid assessment of fines and penalties and possible
termination of permits.
DEM Response a
We agree and have implemented a method to assure timely follow-up with regl latory agency a
warnings.
36 U
a
a
RECOMMENDATIONS -SCRAP METAL PROGRAM
Scrap Metal Program Recommendation #8
a We recommend that RFP and contract documents require contractors to respond within a given time
to any communications pertaining to complaints or deviations from program, permit, or other
regulatory requirements. It is also essential to document in the program file any responses from and
a corrective actions taken by contractors.
DEM Response
a We agree and have implemented clear and concise language in contracts about the need for timely
communication and follow-up. A form for Contractor Complaints was developed and is used to
document complaints through the associated corrective actions implemented.
LAO Follow-up
DEM managers indicate that a newly developed "complaint/resolution form" has been utilized only by
certain staff to document complaints pertaining to programs under their purview. DEM needs to
standardize its complaint resolution policy, process and form for implementation department-wide
a Scrap Metal Program Recommendation #9
0 We recommend that DEM document any operational problem with a contractor during the
administration of a contract. All correspondence, together with a chronology of events and their
resolution, should be documented in the program file. DEM should require contractors to respond to
any communications pertaining to operational problems. Adequate follow-up procedures should also
0 be implemented to ensure that contractor performance remains in compliance with all contractual and
regulatory requirements.
DEM Response
We agree and will implement a chronology of events and their resolutions. A form to document
operational problems will be developed and will be used to document operational problems with a
a contractor during the administration of a contract.
LAO Follow-up
DEM has implemented an "inspection report form" for use by departmental personnel on contract or
site visits for certain programs The form needs to be standardized for all programs and
accompanied by an assessment process with contractor performance reported back and incorporated
into evaluations for future procurement awards.
Scrap Metal Program Recommendation #10
We recommend that DEM document its own departmental responses and corrective actions taken to
resolve'operational problems. The department should develop and implement a training program for
a its personnel regarding standardized procedures for reporting and documentation of events and their
resolution.
a 37
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RECOMMENDATIONS - SCRAP METAL PROGRAM
DEM Response
This is an excellent recommendation that will be implemented when appropriate staff and funding are a
available.
LAO Follow-up
Significant improvement in documentation was noted.
i
Scrap Metal Program Recommendation #11
I
We recommend that DEM adhere to contractual provisions particularly regarding vendor n
compensation. Payment should not be made if a good or service is not covered under the subject ILJI
contract. A standardized payment checklist attached to the front of each contract folder would be
helpful in tracking eligible payments, including a list of contract requirements and timelines and a
column for initialing completion of tasks. 0
DEM Response
We agree that a payment should not be made if it is not covered under the contract. A standardized
payment checklist is an excellent method to track payments. The position of Contracts Clerk once
filled would be instrumental in assisting with this activity. As of this writing, the County has
implemented a hiring freeze. Although the Department notes that the County has implemented a a
hiring freeze, the Department will work closely with the Mayor's office to acquire approval for filling
this position.
LAO Follow-up
i
No exceptions noted.
a
Scrap Metal Program Recommendation #12 I
We recommend that DEM reconcile contractor invoices against supporting documentation before
processing payment. In the event that contractor invoices are resubmitted for payment, DEM should
require written verifiable documentation of revised amounts and properly document departmental
payment authorizations.
DEM Response
We agree that contractor invoices should be reconciled prior to submitting for payment. o
LAO Follow-up
Contractor invoices were reviewed against supporting documentation without exception. However, as
discussed above, without independent verification of diversion weights, the effectiveness of this
control is limited.
38 a
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RECOMMENDATIONS-SCRAP METAL PROGRAM
Scrap Metal Program Recommendation #13
O We recommend that DEM monitor fund balances to ensure that funds are available to pay contractor
invoices. DEM should properly post journal entries according to dates of approval. No journal entry
should be posted in advance of its date of approval by an authorizing body. Accounting entries are
regulated by GAAP, and it is improper to post items prior to approval by an authorizing body.
DEM Response
0 Fund Balances are monitored upon receipt of contractor invoices. Estimates of future expenditures
are determined based on past records and current operations. All accounting entries are posted by
the Department of Finance after receiving proper approvals.
Scrap Metal Program Recommendation #14
O We recommend that DEM implement processes and procedures to permit ongoing and accurate
measurement of incoming tonnages.
DEM Response
a We measure outgoing tonnages to end markets. We don't agree that measuring incoming tonnages
has sufficient value at this time. It would be costly and time consuming for the value generated.
LAO Follow-up
The Auditor recommended independent verification of incoming tonnages as a countermeasure to
O mitigate the "related/affiliated party" relationship between the contractor and the end-market user,
which was known to the Department If implementation of this countermeasure is too costly, a more
cost-effective control should be developed and implemented.
O
Scrap Metal Program Recommendation #15
a We recommend that DEM implement necessary changes to obtain accurate estimates of volume to be
processed for inclusion in procurement documents.
a DEM Response
We will have accurate volumes at the end of the current 10-year contract, for inclusion into future
procurement documents if the operations in the future are comparable to the current operations. We
a don't anticipate changing the current contract unless the end market is unable to receive the current
tonnages produced.
a LAO Follow-up
Without proper controls in place the accuracy of contractor claims cannot be assured As with ADF-
Glass and H15-Beverage containers and preen waste, independent verification of scrap metal weights
a needs to be implemented While the maiority of new RFPs and contracts reviewed during our follow-
up review more clearly delineate specific commodities volumes and requirements for diversion
recycling and/or reuse DEM continues to lack sufficient controls to ensure that weights claimed are
factual accurate and claimed only once.
O
a 39
D
RECOMMENDATIONS - SCRAP METAL PROGRAM
a
Scrap Metal Program Recommendation #16
We recommend that DEM implement standardized project accounting utilizing the County's FRESH Q
financial accounting system to better monitor fund balances and to create reports fori dissemination
to proper personnel on a regular and timely basis.
DEM Response
The Department's Business Services Section has determined that the project accounting module of
the County's FRESH accounting system is not the best application for monitoring and reporting on
our recycling programs. A combination of spreadsheets and FRESH expenditure reports are a more
suitable reporting alternative.
LAO Follow-Up a
As discussed earlier. DEM has implemented a separate billing and payment tracking system that is
not reconciled with the County's FRESH accounting system giving rise to inefficiencies of redundant
data entry and possible inaccuracies absent data reconciliation among multiple information systems
Other audit work indicates that proiect accounting needs to be addressed County-wide
Scrap Metal Program Recommendation #17
We recommend that DEM explore the possibility of exercising its right to assess fines and penalties
against contractors to enforce compliance with contractual terms and conditions. u
• Hawai'i County Code §2-204(a) provides:
"(a) If the Director determines that any person has violated or is violating any provision of this
article or chapter 20 or 21 or any rule adopted pursuant to these chapters, the director may
do any one or more of the following:
(i) Issue an order assessing an administrative penalty for any past of current a
violation;
(ii) Require compliance immediately or within a specified time; and
(iii) Commence a civil action in the circuit court for appropriate relief, including a
temporary, preliminary, or permanent injunction, the imposition and collection of
civil penalties or other relief."
I
DEM Response a
DEM has explored the possibility of assessing fines and penalties, but it doesn't appear that under
the current rules and regulation, DEM has this particular enforcement authority to issue an order to
contractors as a way to enforce compliance with contractual terms and conditions. o
LAO Follow-up
Insufficient contractual provisions and failure to enforce contractual and other legal prof isions relating a
to vendor non-performance or non-compliance have been issues in audits conducted of other County
I departments. Therefore, the Auditor recommends that the Corporation Counsell and Finance
Department implement standardized policies and procedures to ensure that all County contracts are n
reviewed for and contain sufficient provisions for vendor performance evaluations and remedies for U
failure to deliver contracted goods or services. These standardized policies and procedures should
also outline duties and responsibilities on the part of County departments to document vendor
performance.
40 a
0
a
RECOMMENDATIONS -HOUSEHOLD HAZARDOUS WASTE PROGRAM
D RECOMMENDATIONS - HOUSEHOLD HAZARDOUS WASTE PROGRAM
Household Hazardous Waste Program Recommendation #1
We recommend that DEM together with the County review current procedures and research
possibilities for new economically feasible technologies, facilities, and procedures that would identify
and prevent hazardous wastes from entering County landfills.
DEM Response
We agree and in FY07-08 the new RFP #2297 for Household Hazardous Waste Collection included
fluorescent lights which contain a small amount of mercury and prescription medications. Prior to
this, the materials were ending up in our landfills. Unfortunately, the RFP yielded only one proposal.
The Department's Recycling Section applied for and was awarded a CDBG grant to conduct a HHW
event in Pahoa for the first time in March 2008. In addition, the program expanded to include a
Waimea HHW in March 2008, funded by the County. The County has 6 annual Household
O Hazardous Waste collection events which are insufficient to support a total ban from landfills which
currently allows Household Hazardous Waste and Small Quantity Generators. The County
encourages residents to dispose of these materials at one of the HHW events and discourages
disposal at the transfer stations or at the landfills. The County contracted with R. W. Beck to design
0 transfer stations with the plan to offer permanent HHW collection sites at transfer stations.
Additionally, the County publicizes HHW collection programs offered by local businesses. Home
Depot accepts batteries and fluorescent lights during normal business hours. Other businesses
accept car batteries. The County has also discussed Extended Producer Responsibility (EPR)
D legislation for HHW as it is the most expensive diversion program on a per ton basis. As discussed in
the Chapter on General Findings, the 1SWMP will address HHW options.
O LAO Follow-up
DEM has made significant efforts to increase the types and amounts of household hazardous waste
being diverted from County landfills The Updated ISWMP should include a plan and implementation
schedule for each waste type to be eliminated from County landfills to ensure that diversions are
successfully executed and comply with EPA standards.
O Household Hazardous Waste Program Recommendation #2
a We recommend that the County establish permanent sites for ongoing collection of both household
and commercial hazardous wastes.
DEM Response
a DEM Response (updated 219109): We agree, but funding for the additional Solid Waste Division staff
and resources are not available at this time. The Department has contracted with R. W. Beck to
0 design transfer stations with the intent to provide permanent HHW collection sites at transfer stations.
LAO Follow-up
DEM should perform cost-benefit analyses for multiple scenarios to address this ongoing need,
including incorporation of hazardous waste collection in current programs and the assumption of new
programs by County personnel versus private contractors.
0 41
RECOMMENDATIONS - HOUSEHOLD HAZARDOUS WASTE PROGRAM D
Household Hazardous Waste Program Recommendation #3 a
We recommend that DEM clarify the applicability of HRS chapters 342G and 342J to the County's
household hazardous waste program, and either bring the program into compliance with statutory
requirements or obtain a legal determination that compliance is being waived by the State.
DEM Response a
Please refer to the letter from former Department Director, Barbara Bell dated July 10, 2006, pages 6
& 7, HOUSEHOLD HAZARDOUS WASTE PROGRAM. DEM and the auditors have an unresolved
issue about the interpretation of the HRS Chapters and DEM will research the issues further when D
staff is available. While DEM's efforts to provide the public with convenient and safe disposal
alternative for HHW, it is noted that currently the County of Maui has no County-funded programs for
residents to collect household hazardous wastes and the City and County of Honolulu provides
collection events every 2 months. The cost of HHW collection programs is very expensive and DEM
receives many requests from residents to expand the program.
LAO Follow-up D
Again, the Auditor recommends that cost-benefit analyses be conducted to compare continuing to
outsource 100% of haulinq and diversion activities versus having County personnel assume all D
activities up to and including delivery of commodities to private diversion contractors on having County
personnel assume all hauling and diversion activities. That other Counties are not in statutory
compliance with waste diversion regulations should not be a iustification for non-compliance by
Hawaii County. D
Household Hazardous Waste Program Recommendation #4
D
We recommend that DEM implement procedures for reconciliation of contractor collections reports
with shipping manifests and delivery receipts from certified reuse and disposal facilities
DEM Response
This is a valid recommendation that will be implemented when appropriate staff al d funding are
available.
LAO Follow-up
While collection and disposal of commodities are better documented in the Household Hazardous D
Waste Program, not all collection reports could be reconciled to weight claims shipping manifests,
and end-market user receipts. As discussed above, while the maiority of new RFPs and contracts D
reviewed during our follow-up review more clearly delineated specific commoditiesi volumes and
requirements for diversion, recycling, and/or reuse. DEM continues to lack sufficient controls to
ensure that diversion weights claimed are factual, accurate, and claimed only once.
42 D
D
a
RECOMMENDATIONS -WEST HAWAII MATERIAL RECOVERY PROGRAM
RECOMMENDATIONS - WEST HAWAH MATERIAL RECOVERY PROGRAM
a West Hawaii Material Recovery Program Recommendation #1
We recommend that DEM retain in its program file any and all documentation pertaining to changes
O noted on any County form or contract. Should any Contractor or Consultant mark or change any
County form, documentation and authorization needs to be provided.
DEM Response
All contract documents are filed with the project and changes that are recommended by the
Contractor or Consultant are reviewed by Corp. Counsel prior to acceptance.
a LAO Follow-up
In our follow-up review, no instances requiring this comment were noted.
0
West Hawai'i Material Recovery Program Recommendation #2
We recommend that DEM require a Contractor or Consultant to comply with contractual timelines for
submittal of required plans and applications and should document said compliance in the program
a file. The program file should also include complete copies of submitted plans and applications, any
agency comments and approvals generated after plan and application review, and any responsive
communications or revised plans and applications submitted by the Contractor or Consultant.
O DEM Response
Consultants rely on timely interaction with County personnel and regulatory agencies and they are not
always able to maintain their proposed schedule. Because the nature of the work requires this
interaction, and the consultant has no control over the time taken by the other stakeholders, the time
line will often be adjusted. It is the County personnel that have the responsibility to assure that the
project is progressing satisfactorily. County personnel will adjust the schedule as necessary in
contract supplements.
LAO Follow-up
a DEM's response demonstrates why processes and Drocedures for procurement contracting and
program monitoring are so critical to ensure that procurements are initiated and completed in a timely
manner and contract specifications expectations and outcomes are complete to provide
uninterrupted service to the public Reliable Project monitoring and documentation are critical to
a meeting contractual timelines determining responsible stakeholders and keeping contract
supplements and proiect costs to a minimum.
a West Hawaii Material Recovery Program Recommendation #3
C We recommend that DEM assign specific personnel to track and monitor a Contractor's or
Consultant's performance and compliance with contractual requirements prior to payment of any
invoices for services. DEM should not accept invoices that do not document scope of work
completed within contractual timelines. It is further recommended that a checklist of project tasks and
timelines be attached to the front of each contract or program file to facilitate monitoring by
department staff.
43
RECOMMENDATIONS -WEST HAWAII MATERIAL RECOVERY PROGRAM
I i
DEM Response a
The project tasks are included in the scope of work in the contract documents. The method of n
determining the appropriate progress payments is also established by said contract. Some are based U
on time and materials, others are based on a schedule of tasks and values, and some are based on
the percent complete. In most cases County personnel receive a monthly progress report that
provides the required information to determine if the invoiced amount is appropriate.
LAO Follow-up
This recommendation was made in reference to contractual requirements for the disposal of O
household hazardous wastes by the contractor and provision of documentation to DEM within specific
periods of time. At the time of the original audit, the vendor had not fully complied with contractual
requirements before receiving payment from the County. However, during our follow-up review, no
material exceptions were noted.
As discussed above, the maiority of new RFPs and contracts reviewed during our follow-up review
more clearly delineated specific commodities, volumes, and requirements for diversion, recycling
and/or reuse. However, DEM continues to lack sufficient controls to ensure that diversion weights
i claimed are factual, accurate, and claimed only once.
II ~
a
~I a
0
a
a
44
n RECOMMENDATIONS -TIRE RECYCLING PROGRAM
RECOMMENDATIONS - TIRE RECYCLING PROGRAM
a Tire Recycle Program Recommendation #1
We recommend that the County Code, Updated ISWMP, and DEM landfill operations manuals be
a reviewed and further updated to be consistent with the State ban of used tires from County landfills.
DEM Response
We agree and in FY07-08 the County Council passed Ordinance No 07-182 that bans tires and tire
U parts from solid waste landfills in Hawai'i County. The effective date is June 26, 2008.
LAO Follow-up
DEM's response should also discuss the status of updates to the ISWMP and DEM landfill operations
manuals to include the State ban on tires The Auditor also requested an update on the effectiveness
a of the tire ban at County landfills and an explanation of obstacles to compliance, if any.
Tire Recycle Program Recommendation #2
We recommend that DEM implement a process to ensure that all interested parties are included in
the IFB process to ensure strict adherence with procurement laws and to enable the County to
contract for quality services at reasonable prices.
DEM Response
We have been working closely with the Purchasing Division to follow this recommendation. DEM
Business Services Section has an open recruitment for a position for Contracts Clerk to assist with
these activities. Although the Department notes that the County has implemented a hiring freeze, the
D Department will work closely with the Mayor's office to acquire approval for filling this position.
LAO Follow-up
D Before hire of additional contracts personnel DEM should develop department-specific polices and
procedures including a procurement checklist and timeline to guide new staff in the performance of
their assigned duties.
a
Tire Recycle Program Recommendation #3
We recommend that the Purchasing Division and DEM determine whether file documentation can be
improved to develop a priority list for procurements.
a DEM Response
We have been working closely with the Purchasing Division to follow this recommendation. DEM
a Business Services Section has an open recruitment for a position for Contracts Clerk to assist with
these activities. Although the Department notes that the County has implemented a hiring freeze, the
Department will work closely with the Mayor's office to acquire approval for filling this position.
O
45
a
RECOMMENDATIONS - TIRE RECYCLING PROGRAM a
LAO Follow-up
Again, before hire of additional contracts personnel, DEM should develop department-specific polices D
and procedures for establishment of a complete list of potential vendors, including reports of current
and past vendor performance, to be utilized for future procurements and vendor notifications.
Tire Recycle Program Recommendation #4
We recommend that DEM implement formal policies and procedures for program review and
contractor evaluation to better determine whether a current contract should be extended or a new
procurement process should be initiated: a
• Including a cost/benefit analysis of contract extension versus new procurement: i-I
• Allowing sufficient time for a proper competitive procurement process. 1
• Providing for timely execution of a contract extension or issuance of a notice of, procurement. ~J
• Providing internal and external procedures and forms for documentation, authorization, and
communication of contract awards.
DEM Response a
We have been working closely with the Purchasing Division to follow this recommendation. DEM
Business Services Section has an open recruitment for a position for Contracts Clerk to assist with a
these activities. Although the Department notes that the County has implemented a hiring freeze, the
Department will work closely with the Mayor's office to acquire approval for filling this position.
I
LAO Follow-up 0
Some consideration of current vendor performance should be immediately incorporated into the
contract "extend or re-bid" decision process. Documentation of vendor performance should be an
established component of program oversight and monitoring and not solely the responsibility of a
Contracts Clerk.
Tire Recycle Recycle Program Recommendation #5 Recommendation #5 0
We recommend that DEM determine why timeliness in its procurement is problematic and implement
appropriate countermeasures to ensure that:
• Responses to written requests from the Purchasing Division regarding procurements, o
contract awards, and contract extensions are communicated in a timely manner.
• Procurements are initiated and completed in a timely manner.
• Contracts are awarded in timely manner. O
46
RECOMMENDATIONS-TIRE RECYCLING PROGRAM
DEM Response
We have been working closely with the Purchasing Division to follow this recommendation. DEM
Business Services Section has an open recruitment for a position for Contracts Clerk to assist with
these activities. Although the Department notes that the County has implemented a hiring freeze, the
Department will work closely with the Mayor's office to acquire approval for filling this position.
LAO Follow-up
Inclusion of sufficient controls at the procurement phase can reduce the number of personnel
required to monitor contracts. As discussed above while the majority of new RFPs and contracts
reviewed during our follow-up review more clearly delineated specific commodities, volumes, and
a requirements for diversion recycling and/or reuse DEM continues to lack sufficient controls to
ensure that diversion weights claimed are factual accurate and claimed only once.
a Tire Recycle Program Recommendation #6
We recommend that DEM develop formal procedures and forms for authorization of contract-related
changes such as account balance liquidation.
DEM Response
We agree with this recommendation and the Business Services Section has an open recruitment for a
position for Contracts Clerk to assist with these activities. Although the Department notes that the
County has implemented a hiring freeze, the Department will work closely with the Mayor's office to
acquire approval for filling this position.
LAO Follow-up
D The DEM Accountant confirms that a formal procedure for authorization of contract-related changes
is now in place.
a Tire Recycle Program Recommendation #7
a We recommend that DEM review documentation submitted by contractors for compliance with
contractual and regulatory permit requirements.
a DEM Response
We agree with this recommendation and the DEM Business Services Section has an open
recruitment for a position for Contracts Clerk to assist with these activities. The Department notes
that the County has implemented a hiring freeze. Although the Department notes that the County has
implemented a hiring freeze, the Department will work closely with the Mayor's office to acquire
approval for filling this position.
Tire Recycle Program Recommendation #8
We recommend that DEM develop policies and procedures pertaining program incident resolution
and reporting.
47
a
RECOMMENDATIONS -TIRE RECYCLING PROGRAM a
DEM Response
We agree with this recommendation and the DEM Business Services Section Ihas an open a
recruitment for a position for Contracts Clerk to assist with these activities. Although the Department
notes that the County has implemented a hiring freeze, the Department will work closely with the
Mayor's office to acquire approval for filling this position.
LAO Follow-up
Again, inclusion of sufficient controls at the procurement phase can reduce the number of personnel a
required to monitor contracts.
Tire Recycle Program Recommendation #9 a
We recommend that DEM provide staff with clearly defined job responsibilities and adequate training
and policy guidance regarding transfer station operations and contractor monitoring duties.
DEM Response
We agree as this recommendation is critical to appropriate operations in compliance with the State a
solid waste regulatory permits. This is a valid recommendation that will be impleemented when
appropriate staff and funding are available.
LAO Follow-up a
Please see our discussion at Recommendation No. 6 - General Findings related to contractor
monitoring duties at transfer stations and landfills.
i
(Tire Recycle Program Recommendation #10
! a
We recommend that DEM implement the changes necessary to provide the capability to obtain
accurate estimates of volumes to be processed for inclusion in procurement and contract
documents.
DEM Response a
We are tracking the volumes and future procurements will include this information.
LAO Follow-up a
The Auditor confirms improvement in the specificity of procurement and contract documents. but as
discussed earlier, improved controls are needed regarding verification of weights claimed as diverted.
Tire Recycle Program Recommendation #11 0
We recommend that DEM implement a mechanism for ongoing measurement of inflow volumes.
a
48 a
a
RECOMMENDATIONS -TIRE RECYCLING PROGRAM
DEM Response
We agree and are tracking the volumes.
LAO Follow-up
a The Auditor agrees progress is being made in tracking volumes, but improved controls are needed to
confirm actual compliance with State law banning tires from County landfills.
a
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a
RECOMMENDATIONS- EPA GRANTS - PHASE I Kea'au Recycling and Reuse Center (KKRC) a
RECOMMENDATIONS -EPA GRANTS -PHASE I
Kea`au Recycling and Reuse Center (KKRC)
EPA Grants Phase I Recommendation #t
We recommend that the County as EPA Grant awardee monitor and review all procurement
processes and obtain sufficient documentation to provide assurance that all procurements are made a
in accordance with applicable grant and procurement laws and regulations.
EPA Grants Phase I Recommendation #2 O
We recommend that DEM ensure the timely procurement of its contracts and/or agreements, so that
a valid contract is issued prior to commencement of work. A spreadsheet or other tracking method
should be implemented to ensure completion of the procurement process prior to commencement of
each contract.
EPA Grants Phase I Recommendation #3
We recommend that the County consider revision of the County Code and procurement rules relating
to "conflict of interest" and "related party" issues on the part of employees, contractors and
subcontractors, which specifically addresses definitions, required disclosures, and conditions under a
which such relationships are prohibited or permitted.
EPA Grants Phase I Recommendation #4
We recommend that DEM implement policies and procedures for monitoring and control of contractor
performance to ensure that contractual obligations to the County are being fulfilled and public funds
are being properly expended.
PA Grants Phase I Recommendation #5 a
We recommend that DEM assign personnel to reconcile contractor claims and authorize payment of a
invoices. DEM should require itemization of invoiced amounts and sufficient supporting
documentation which clearly reconciles to each itemized amount. For invoices resubmitted for
payment, careful review is needed to ensure that no double- or over-billing has occurred.
EPA Grants Phase I Recommendation #6
We recommend that DEM include in its program file any and all documentation pertaining to any
complaints, improprieties, or discrepancies that may occur during a contract period, including a
chronology of the resolution process.
DEM Response O
The County has closed EPA Grant Phases I & 11 and filed the final reports with EPA. DEM will
implement recommendations for future grants.
LAO Follow-up a
The Auditor confirms closing of EPA Grants, Phases I and 11, for the Kea'au Recvcllino and Reuse a
Center (KKRC). In the future, the Auditor recommends that DEM pursue alternate funding and directly
administer the associated program, thereby minimizing excessive loss of funds to multiple lavers of
agencies for administrative rather than program activities.
a
50
RECOMMENDATIONS- EPA GRANTS PHASE II Kea'au Recycling and Reuse Center (KKRC)
RECOMMENDATIONS - EPA GRANTS - PHASE II
Kea`au Recycling and Reuse Center (KKRC)
a EPA Grants Phase II Recommendation #1
a We recommend that DEM re-evaluate its procurement process to ensure that all performance
requirements and tasks are sufficiently communicated to all potential providers and that process
volume estimates are realistic.
O • To ensure fairness in the procurement process.
• To allow for accurate budgeting and contracting and reduce the need for issuance of
supplemental funding contracts.
EPA Grants Phase II Recommendation #2
0 We recommend that DEM document issues related to supplemental contracts when two different fund
sources are involved. Documents should include a detailed chronology of events that necessitated
the funding action and a written analysis of the decision to authorize commitment of additional funds.
0 EPA Grants Phase II Recommendation #3
We recommend that DEM reconcile contractor invoices with supporting documentation and
a contractual requirements and should require that revised invoices be accompanied by written
clarification of increased amounts. Supplemental contracts should only be based on increases to
contract scope at the County's request.
O EPA Grants Phase 11 Recommendation #4
We recommend that DEM re-evaluate its administration of grant programs and analyze the cost-
benefits of hiring additional personnel for grant management versus contracting private service
providers. The analysis should weigh the procurement of one. contractor for a specific contract
against the dedication of an internal personnel position(s) for the administration of multiple contracts.
EPA Grants Phase 11 Recommendation #5
We recommend that DEM review and monitor its contracts to ensure that all applicable governmental
permits are obtained prior to commencement of work on County property. Permits must also be
a timely obtained by DEM to avoid assessment of sanctions and penalties against the County and the
waste of public funds.
EPA Grants Phase 11 Recommendation #6
a We recommend that DEM ensure that all documentation relating to grant and contract administration
is current and complete in the program file. Documentation should include, but not be limited to, all
a intra- and inter-departmental communications, communications to and from State and federal
regulatory agencies, all governmental permit application and approvals, all regulatory agency
evaluations and inspection reports, and all correspondence, plans, and reports from program
contractors and subcontractors.
EPA Grants Phase 11 Recommendation #7
We recommend that DEM document any deficiencies relating to operations under its contracts.
Documentation should include, but not be limited to, a chronology of events, the cause of
51
RECOMMENDATIONS- EPA GRANTS PHASE II Kea'au Recycling and Reuse Center (KKRC) o
deficiencies, corrective actions implemented to remedy deficiencies, and final resolution of said o
deficiencies.
DEM Response
The County has closed EPA Grant Phases 1 & 11 and (led the final reports with EPA. DEM will
implement recommendations for future grants. o
LAO Follow-up
The Auditor confirms closing of EPA Grants Phases I and 11, for the Kea'au Recycling and Reuse
Center (KKRC). In the future, the Auditor recommends that DEM pursue alternate funding and directly
administer the associated program thereby minimizing excessive loss of funds to multiple lavers of
agencies for administrative rather than program activities
0
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52 0
0
RECOMMENDATIONS - EPA GRANTS PHASE III Waste Reduction and Recycling Project (West Hawai'i)
a RECOMMENDATIONS - EPA GRANTS - PHASE III
Waste Reduction and Recycling Project (West Hawaii)
EPA Grants Phase III Recommendation #1
a We recommend that DEM initiate a complete assessment of waste reduction, recycling, and reuse
capabilities at County transfer stations.
• For those transfer stations with waste reduction capability, identify necessary repairs and
O related costs to continue diversion, recycling, and reuse activities.
• For those transfer stations lacking waste reduction capability, evaluate design, permitting,
cost, timeline, and manpower issues for implementation of diversion, recycling, and reuse
activities.
EPA Grants Phase III Recommendation #2
a We recommend that DEM implement internal policies and procedures for grant management,
including:
a • Oversight of contractor and subcontractor performance and billings.
• Tracking of compliance with funding agency requirements, including completion, review, and
submission of reports in a timely manner.
• Review and approval of all press releases and outreach and educational materials for
compliance with grant requirements prior to publication and dissemination.
a • Monitoring of contracts to enable timely negotiations for contract extensions or new
procurements.
EPA Grants Phase III Recommendation #3
We recommend that DEM consider revising HIEDB's project scope or reduce its contract amount
under the MOA, since establishment of the model recycling or reuse center in West Hawai'i will not be
implemented prior to expiration of the EPA Grant III funding period.
EPA Grants Phase III Recommendation #4
a We recommend that DEM review departmental policy relating to multi-tier subcontracting, and
determine whether the practice is a cost effective use of grant monies.
EPA Grants Phase III Recommendation #5
We recommend that as the designated recipient of EPA grant funds, the County should re-evaluate
the cost-benefit of hiring additional departmental personnel over outsourcing program management
and outreach and education components.
DEM Response
The County has closed EPA Grant Phases 1 & 11 and filed the final reports with EPA. The County has
requested a no-cost extension for Phase 111 through December 2009. The Phase III Workplan was
also revised in that the County will be using the balance of funds, $170,000, to provide Reuse
a Shelters at the County Transfer Stations. EPA Phase IV funds were paid directly to HIEDB. The
Department's Recycling Section is working closely with EPA and the DEM Business Services Section
a 53
a
RECOMMENDATIONS - EPA GRANTS PHASE III Waste Reduction and Recycling Project (West Hawai'i)
I I
to follow the recommendations and improve the management of the EPA grant funds. DEM Business a
Services Section has an open recruitment for a position for Contracts Clerk to assist with these
activities. Although the Department notes that the County has implemented a hiring freeze, the a
Department will work closely with the Mayor's office to acquire approval for filling this position.
LAO Follow-Up
The Auditor confirms that remaining Phase III funding for the Waste Reduction and ReIcvcling Project
(West Hawaj'i) will be utilized for reuse shelters at County transfer stations and Phase IV funding was
granted directly by the EPA to HIEDB. In the future the Auditor recommends that DEM pursue
alternate funding and directly administer the associated program thereby minimizing excessive loss O
of funds to multiple lavers of agencies for administrative rather than program activities.
a
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54
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