2006-01-AU Audit of the County of Hawai‘i's Recycling and Diversion Grants Program

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Chapter 3 DIVERSION GRANT PROGRAM Audit Narrative The Department of Environmental Management (DEM) issues annual "Diversion Grant Program Guidelines" that outline the purpose, funding levels, eligibility requirements, evaluation criteria, and application and operational requirements relating to the program for each fiscal year. The "Claim Reports" section of Program Guidelines states: "Included in this packet is a Diversion Grant Claim Form (Exhibit I for paper fibers and Exhibit II for plastics and cooking oil) that must be submitted quarterly along with the appropriate documentation on the source(s) of the collected and diverted materials, bill(s) of lading, certified weight scale tickets, and documentation of purchase from buyer(s) /end- user(s). Eligible parties applying for Diversion Grants are responsible for providing complete information to the County on a Diversion Grant Claim Form." Background of Contracts For fiscal year 2003 -2004, none of the diversion contracts issued by DEM met the audit sampling criteria of contracts equal to or greater than $100,000. For fiscal year 2004 -2005, the Diversion Grant Program Guidelines issued by DEM stipulated that: Total available funding of $250,000 be awarded semi - annually as follows: $100,000 at a rate of $40 /ton for qualifying paper fibers; $ 10,000 at a rate of $160 /ton for recyclable plastic; and $ 15,000 at a rate of $60 /ton for used cooking oil; with no more than one -half of the semi - annual allotment for a specific commodity to be awarded to any single grantee. While DEM issued contracts to several vendors for diversion of paper products, plastics, and cooking oil for fiscal year 2004 -2005, only those issued to Business Services Hawaii (BSH) and Atlas Recycling met the audit sampling criteria of contracts equal to or greater than $100,000. For the first half of fiscal year 2004 -2005, DEM also issued supplemental contracts to both BSH and Atlas Recycling to increase the amounts of commodities diverted. Business Services Hawaii The "Diversion Grant Program for FY 2004 -2005 Agreement" dated September 14, 2004, between the County of Hawaii and HMP, Inc. dba Business Services Hawaii (BSH) was assigned Contract No. 000143, for the semi - annual period July 1, 2004 to December 31, 2004, in an amount not to exceed $50,000. The contract was to pay the grantee for reuse or recycling of commodities to an on- island or off - island end market as follows: $40 per ton for office paper (including computer, white, or colored ledger paper), cardboard, and all other paper not previously described, and $160 per ton for plastics. The total grant amount was specifically allocated as follows: $45,000 for paper fibers 20