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

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Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM signage, on -site promotion, work with community groups to address concerns about the program and its operations." o A section entitled "Audits" which provided, in pertinent part: "Participants are subject to audit by the County to assure that the activities were in accordance with the terms of the Glass Recycling Program and the executed contract." o A section entitled "Payment" which provided, in pertinent part: "Payment requests shall be made by submitting all attached Claim Forms (Exhibit 1), End Market Verification Form (Exhibit II) and the Glass Recovery Program Activity Form (Exhibit III)." For fiscal year 2004 -2005 o A new section was added entitled "Claim Reports" which provided, in pertinent part: "An accurate description of sources of glass material collected for diversion must accompany all claim forms. Exhibit III shall be submitted with information on the specific locations and tonnages of glass collected for eventual diversion." Contracts During fiscal year 2003 -2004, DEM received a total of $298,000 from DOH under the ADF program, and contracted for processing a maximum of 3,037,500 pounds of recycle /reuse glass at a cost of ten cents per pound, for a total cost of $303,750. The actual weight reported as processed and sold was 2,991,256 pounds, with actual payouts totaling $292,809.60. For fiscal year 2004 -2005, the DOH grant was also $298,000, and DEM set a rate of eight cents per pound allowing for processing of 3,662,500 pounds of glass. Actual weight reported as processed and sold was 2,435,900 pounds, with reported payouts totaling $202,753.60. ADF Guidelines stipulate that contracts be issued to qualified recyclers at a specific rate per pound up to a maximum dollar amount over a six -month period. During fiscal years 2003 -2004 and 2004 -2005, contracts were issued to two for - profit entities: Atlas Recycling (Atlas) and HMP dba Business Services Hawaii (BSH). The awards were deemed exempt from the State procurement code by the Finance Department pursuant to HRS §103D- 102(b)(2)(A). Both contractors process glass using "crushing or pulverizing" equipment, then sell or donate the processed glass for various end uses such as construction backfill and roadway base course. For the period January to June 2005, Contract No. 301 was issued to BSH and Contract No. 317 was issued to Atlas, each in the amount of $73,250. Reconciliation of payment documentation for these contracts showed differences between original contract amounts and actual contract payments indicating liquidations of approximately $40,000 per contract. However, DEM documentation showed liquidations of only $20,000 per contract. Auditors inquired about the differences in liquidated amounts, and requested detailed documentation. DEM personnel indicated that the contracts had been reduced during the period by $20,000 each. However, to date, neither documentation nor an explanation has been received from the department by the audit team. 28