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 With the implementation of the H15 program in October 2004, disparity was created between the processing rates paid to contractors for ADF glass and H15 glass. If ADF container weights were processed as HI5 weights, the processor would be paid approximately 19.2 cents per pound versus the eight cents per pound paid under the ADF program. This is based on a calculation of 2.4 containers per pound multiplied by the five cent per container deposit refund, plus the 3 cent per container handling fee. In an attempt to resolve this disparity, DEM increased the per pound handling fee for ADF glass to 20 cents per pound for the period of January to June 2006. Whether the County will be able to continue to underwrite this disparity or continue the ADF program is unclear. Although the State Environmental Management Special Fund is intended to finance county glass recovery programs, the Governor appropriated $2,000,000 of the fiscal year 2003 -2004 special fund surplus to the General Fund. The result of this appropriation is a severe reduction in ADF program funding with an allocation to Hawaii County of only about $16,650 for fiscal year 2006 -2007. Recycling Coordinator O'Hora -Weir advised that DOH communicated in July 2004 that the County's allocation for fiscal year 2006 -2007 would be approximately $149,000. However, DOH revised that figure to $63,500 in January 2006, and further reduced the allocation to $16,650 in March 2006. The explanation given was that ADF revenue for calendar year 2005 was only $683,630 compared with $3,381,455 in fiscal year 2003 -2004 and $1,500,015 in fiscal year 2004 -2005 due to increased use of plastic containers for products traditionally packaged in glass (such as mayonnaise and alcohol). However, since calendar and fiscal years are not comprised of the same twelve -month periods, the accuracy and logic of the State's comparison are questionable. The $298,000 allocated to the County in fiscal year 2004 -2005 represents 8.81 percent of the $3,381,455 in ADF revenues reported for fiscal year 2003 -2004, and the $298,000 allocated to the County in fiscal year 2005 -2006 represents 19.86 percent of the $1,500,015 in ADF revenues reported for fiscal year 2004 -2005. Even when calculating 8.81 percent of the $683,630 in State revenues for calendar year 2005, the County's allocation for fiscal year 2006 -2007 would presumably be approximately $60,228, well above the $16,650 allocated to Hawaii County. Auditors requested from DOH a historical accounting of its ADF account and the Environmental Management Special Fund. DOH responded that it did not have the information available, but would attempt to procure it. However, to date, auditors have not received the information. Auditors also contacted DOH Solid Waste Planner Lane Otsu to request statistical data on the percentage of ADF glass that should have shifted to the County's HI5 program. Mr. Otsu said the data is not tracked by County, and that the DOH is still trying to get a "handle" on what the statewide percentage should be. According to Recycling Coordinator O'Hora -Weir, Mr. Otsu indicated that 65 percent of ADF glass was expected to shift to the County's HI5 program. Analysis of the change in ADF claims for the first six months of the HI5 program appear to be in line with this percentage, with BSH showing a 58 percent decrease and Atlas showing a 65 percent decrease in ADF tonnage reported for the period January to June 2005 compared with the same period in 2004. If State funding for the ADF program is drastically reduced to the aforementioned levels, the County is left with two options: 1) fund the deficiency and continue the program on its own, or 2) severely limit or discontinue the program. If the second option is implemented, glass recycling operators will be given further incentive to include ADF glass in their HI5 weight claims. 34