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 Atlas Recycling Site Visit Atlas operates two recycling facilities in Hawaii County, one in East Hawaii and one in West Hawaii. On March 13, 2006, auditors met with Michael and Willie Allen at Atlas' Hilo facility on Maka`ala Street. Ms. Allen indicated that Atlas had just implemented a new procedure in which all glass brought in for processing must be emptied into a wire basket and visually inspected prior to weighing to ensure segregation of non -HI5 containers such as ADF glass. This procedure was implemented in response to instructions from DOH. Auditors observed contractor operations and noted that the prescribed procedure was being followed. However, Ms. Allen indicated that employees did not always follow this procedure during the audit period (July 1, 2003 to June 30, 2005). Thus, it is probable that ADF glass was included in weights the contractor used to calculate its HI5 redemption refunds and subsequent payment claims to DOH. Auditors also noted that no procedures were in place to document incoming ADF glass tonnage, and that ADF collection bins were not clearly marked and other ADF signage was absent. According to Mr. Allen, ADF glass containers are segregated upon receipt and put into storage bins until a sufficient number has been collected to warrant processing. Atlas only weighs a delivery and pays a buy -back incentive when an individual delivery is at least 200 pounds. Atlas has only one pulverizer which is located in West Hawaii, so when storage bins at the Hilo facility become full, glass is transported to the West Hawaii facility to be crushed and sold. No independent monitoring or controls appear to be in place other than periodic observations by DOH -HI5 inspectors to confirm that ADF containers are segregated and not included in HI5 weights. Application of further audit procedures, such as comparison of DOH -HI5 claim weights versus actual HI5 redemption payouts, could provide some assurance that ADF materials are not being diverted and claimed under the HI5 program. However, the County, did not have a HI5 contract with Atlas for the audit period, and therefore, had no jurisdiction to audit Atlas' HI5 records. In discussion with DOH personnel, Environmental Health Specialist Peter Bloom stated that he has on a random basis reconciled residential redemption receipts to Atlas' HI5 weight claims and found no material exceptions. However, he further indicates that since Atlas reports /claims HI5 containers collected from commercial sources for which no deposit refund is paid and no record of incoming weight is generated, verification that ADF glass is not included in H15 claims is not possible. In discussion with Ms. Allen, she confirmed that while East Hawaii commercial accounts normally bring in ADF and H15 glass containers already separated, Atlas has a significant number of West Hawaii accounts (mainly resorts) from which ADF and HI5 glass containers are not segregated or weighed, since they simply want to dispose of containers and do not require payment of redemption fees. Therefore, Atlas has no records for reconciliation or verification of ADF and H15 weights from commercial sources in West Hawaii. DOH Specialist Bloom stated that Atlas has advised that it separates commercial containers on the conveyor belt leading to its pulverizer and maintains separate storage bins for crushed ADF and H15 glass, and that based on his periodic inspections of HI5 glass collections, he has not observed significant amounts of ADF glass material present. 29