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Chapter 3 DIVERSION GRANT PROGRAM
<br />and $5,000 for plastics. DEM issued the contract for processing of plastics even though the
<br />contractor's processing site was not permitted for accepting or processing of plastics.
<br />Supplementary Contract No. 1 dated November 23, 2004, provided for an additional $15,000 for
<br />diversion of paper fibers. The supplementary contract was issued when the quantity of paper fibers
<br />collected exceeded projected amounts for the semi - annual period July 1, 2004 to December 31, 2004.
<br />It was understood and agreed upon between the County and BSH that the combined contract amount
<br />of $65,000 could not be exceeded unless additional funds were allocated by written agreement.
<br />Contract No. 000301 dated March 24, 2005, covered the second semi - annual period January 1, 2005
<br />to June 30, 2005, in an amount not to exceed $63,000. Contract terms for the reuse or recycling of
<br />commodities to an on- island or off -island market remained unchanged: $40 per ton for office
<br />(computer, white or colored ledger) paper, cardboard, and other paper not previously described, and
<br />$160 per ton for plastics. The total grant amount was specifically allocated as follows: $58,000 for
<br />paper fibers and $5,000 for plastics.
<br />Atlas Recycling
<br />Contract No. 000139 dated September 14, 2004, between the County of Hawaii and Atlas Recycling,
<br />for the period July 1, 2004 to December 31, 2004, was issued for the diversion of paper products, at a
<br />rate of $40 per ton, in an amount not to exceed $50,000.
<br />Supplemental Contract No. 1 dated November 23, 2004, for the period July 1, 2004 to December 31,
<br />2004, was issued to provide for diversion of additional paper product tonnage, at a rate of $40 per
<br />ton, in an amount not to exceed $25,000.
<br />Contract No. 000317 dated April 22, 2005, for the period January 1, 2005 to June 30, 2005, was
<br />issued for the diversion of paper products, at a rate of $40 per ton, in an amount not to exceed
<br />$68,000.
<br />Atlas Recycling reported and was paid for 3,320.33 tons of diverted paper products for fiscal period
<br />July 1, 2004 to June 30, 2005. However, documentation accompanying contractor claims reports did
<br />not provide commodity source information. Also, the sale of paper products to an off - island end
<br />purchaser was documented by a typed list of container numbers and corresponding weights on
<br />purchaser Island Recycling's letterhead, but no documentation of payment was provided. These may
<br />not be "arms length" transactions, since James Nutter, the principal officer of purchaser Island
<br />Recycling, and Michael Allen, owner of seller Atlas Recycling, are the principals of Big Island Scrap
<br />Metal, Inc. The auditors recommend the County pursue legislation requiring disclosure of all "related
<br />parties" or "conflicts of interest" with respect to County procurements. This is not to say that these
<br />relationships are inherently problematic. However, disclosure combined with proper controls will
<br />offer greater protections to both the County and the contractor and reduce the perception or
<br />possibility of impropriety.
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