HomeMy WebLinkAbout2006-01-AU Audit of the County of Hawai‘i's Recycling and Diversion Grants ProgramCONSTANCE R. KIRIU
County Clerk
July 13, 2006
TO
Cuffe1"
SUBJECT:
County of Hawai `i
Office of the County Clerk
25 Aupuni Street
Hilo, Hawaii 96720
Telephone: (808) 961 -8255 Facsimile: (808) 961 -8912
Stacy K. Higa, unci hair,
And Member of the C unty Council
William E. Smith
Deputy County Clerk
WILLIAM E. SMITH
Deputy County Clerk
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Audit of the County of Hawai`i's Recycling and Diversion Grants
Program
For your information and review, we are transmitting the above report, which was
prepared by the Legislative Auditor's Office pursuant to Resolution No. 168 -05
requesting the Legislative Auditor's Office to conduct a Limited Scope Performance
Audit of the County of Hawai`i's Recycling and Diversion Grants Program.
The affected agency was given the opportunity to respond and their response is located at
the end of the report listed as Exhibit 1.7.
Should you have any questions regarding the report, please call Audit Analysts, Colleen
Schrandt or Lane Shibata.
Att.
COMM6 No. .42.-s
Ref. Toy
Raf. Date,
Hawai `i County Is An Equal Opportunity Provider And Employer
co
ua
Audit of the County of Hawai`i's Recycling and Diversion Grants
Program
For your information and review, we are transmitting the above report, which was
prepared by the Legislative Auditor's Office pursuant to Resolution No. 168 -05
requesting the Legislative Auditor's Office to conduct a Limited Scope Performance
Audit of the County of Hawai`i's Recycling and Diversion Grants Program.
The affected agency was given the opportunity to respond and their response is located at
the end of the report listed as Exhibit 1.7.
Should you have any questions regarding the report, please call Audit Analysts, Colleen
Schrandt or Lane Shibata.
Att.
COMM6 No. .42.-s
Ref. Toy
Raf. Date,
Hawai `i County Is An Equal Opportunity Provider And Employer
Legislative Auditor County of Hawaii
OVERVIEW
Limited Scope Audit of the Department of Environmental Management's
Recycling and Diversion Grants Program, Fiscal Years 2004 and 2005
Report No. 01 -06, June 2006
This limited scope performance audit of the Department of Environmental Management,
Solid Waste Division, Recycling and Diversion Grant Programs for fiscal years 2004 and
2005, was initiated at the request of the Hawaii County Council in Resolution No. 168 -05.
This audit is intended to provide an objective assessment of the Department of
Environmental Management's compliance with applicable governmental regulations
related to its recycling and diversion programs; an objective assessment of its compliance
with applicable policies and statutory requirements in its procurement and contracting of
program services; an objective assessment of its implementation of and adherence to
standardized policies and procedures for managing and monitoring said programs; and
constructive recommendations for improvement of the Department's internal controls to
assist in more effective and efficient operation of the County's Recycling and Diversion
Programs.
Background
The Department of Environmental Management (DEM) was created by Charter
amendment in December 2000, and tasked with the enormous responsibility of
management, oversight, and operation of all solid waste and wastewater functions for
Hawaii County which were formerly under the purview of the Department of Public
Works.
The auditors would like to acknowledge that while audit findings indicate material
weaknesses in DEM's internal controls, the recycling and diversion programs represent
only one facet of the Department's responsibilities and accomplishments. When the
Department director was hired in 2002, she assumed responsibility for a department that
lacked several key management personnel, was facing a crisis forced by the imminent
closure of the East Hawaii Landfill, had no written recycling and diversion program
policies and procedures, and was statutorily mandated to meet certain recycling and
diversion goals with inadequate and degraded infrastructure.
Summary
In contrast to mainland communities, cost- effective solid waste disposal in Hawaii County
is complicated by several unique factors including geographic location, regulatory
restrictions on marine transport, limited domestic markets for recycling and reuse of end
products, and difficulty in providing convenient collection facilities due to numerous small
rural population distributions. Thus, Hawaii County continues to significantly exceed the
national average of pounds of solid waste generated and landfilled per capita as reported by
the U. S. Environmental Protection Agency (EPA). As a result, the County needs to
develop and implement methods to better measure the effectiveness of its recycling,
diversion, outreach, and education programs. Best Practices for source reduction,
recycling, and reuse should be researched to aid in development and implementation of
more effective programs. In addition, source reduction programs should include importers,
manufacturers, and packagers.
Based on examination of program files, the auditors determined that responsibility for the
Department's lack of progress in implementing timely and effective solutions to Hawaii
County's solid waste needs does not rest solely with DEM. Funding deficiencies in
previous years, changes in County governance, and the lack of County -wide accountability
for failure to adhere to a solid waste management plan have also contributed to delays. The
lead time for implementation of solid waste technologies and infrastructure is lengthy due
to permitting and regulatory constraints, and therefore, requires the continued commitment
of the County Administration and Council. However, the administrative and legislative
branches have yet to agree upon or commit to a long -term plan for addressing solid waste
that will provide clear direction to the Department irrespective of changes in elected
officials.
The County's Updated Integrated Solid Waste Management Plan (ISWMP) is outdated,
and does not contain sufficient content for use as a guide and measurement tool for the
County's progress in implementing solid waste solutions. It does not include standardized
methods and specific criteria for use in determining which technologies, funding
mechanisms, and labor sources will be used. It is not supported by a detailed "working
plan" that delineates specific tasks, sets timelines, and assigns stakeholder responsibility
for timely completion of tasks.
The Department and its Special Programs Group do not have written policies and
procedures relating to work flow, conmrnunications, procurements, contracting, program
monitoring, control, evaluation and reporting, transaction processing, and manpower needs
assessment. The Department has not implemented procedures to permit ongoing and
accurate measurement of various solid waste components which results in inaccurate
estimates of volumes to be processed under recycling and diversion contracts, issuance of
numerous contract addenda to address additional volumes and expenditures, and a lack of
independent data for reconciliation and validation of volumes claimed as processed.
The Department does not implement sufficient internal controls to permit regular
assessment of the effectiveness and efficiency of its recycling and diversion programs, and
to reasonably ensure that a specific program meets its objectives. The Department has not
implemented sufficient internal controls to ensure that unintended actions do not occur as a
result of failure to meet permit and grant application; renewal, and reporting deadlines; that
data reported to and by the Department is consistent, timely, valid, reliable, and
disseminated to the proper agencies and personnel; and that program procurements and
operations are in compliance with applicable laws, regulations, and provisions of contract
and grant agreements.
Recommendations
The auditors recommend that the Mayor and County Council, in consultation with DEM,
develop a plan and schedule for revising the County's Updated ISWW. The revision
should include a method for input by all stakeholders and a commitment by all
stakeholders to implement and adhere to the revised plan irrespective of changes in elected
officials. An accompanying detailed "working plan" also needs to be developed to drive
and guide implementation of the revised ISWMP, by outlining specific tasks to be
completed, a schedule for their completion, and assignment of stakeholders responsible for
each task. The County should also consider codifying this revised long -term solid waste
management plan in the form of an ordinance that establishes a mechanism for regular and
frequent review and reporting of stakeholder progress.
The auditors also recommend that the County Council adopt an ordinance to clearly
establish the County's authority to audit any entity with which it contracts, regardless of
whether the procurement is subject to or exempt from State and County procurement code
provisions. In keeping, DEM should consult with the Finance Department and the
Corporation Counsel to update its written policies and procedures relating to procurement
and contracting, including the award of grant monies to non - profit and for - profit entities.
The auditors recommend that the County consider implementing a standardized policy
regarding documentation of any and all communications received by a department from
federal and State governmental agencies concerning possible regulatory violations or
sanctions, and require prompt transmittal of any and all such communications to the
Mayor, Managing Director, Finance Director, Corporation Counsel, and County Council
for information and input.
The auditors recommend that DEM evaluate areas of possible risk, exposure, and control
deficiencies, and develop and implement necessary internal controls. DEM should
document all tasks and processes for which it is responsible, using "flow charts" or
"process mapping" to aid in evaluating the adequacy of staffing levels and training. DEM
should consult with other County departments and State agencies to develop "best
practices" for program compliance, effectiveness, and efficiency. DEM should implement
regular and frequent program reviews to monitor compliance and progress in an effort to
maximize effectiveness and efficiency, while minimizing risk and exposure to
governmental sanctions and civil liabilities. DEM should utilize the County's "FRESH"
project accounting module to provide timely and accurate reporting of contract and
program financial and performance data. DEM should implement processes and
procedures for regular and continuous measurement of the various waste types entering
and being diverted from the County's solid. waste. stream. DEM should also include
accurate descriptions and volume estimates of waste types to be processed as well. as
specific requirements for reporting under each procurement and contract document.
If the Department determines that it cannot implement the foregoing internal control
measures with existing staff within the next six months, the auditors recommend that DEM
consider procuring a private consultant to assist in its development of internal policies and
procedures, process documentation, and staff assessments and training.
Response
In response to the auditors' draft report, the Department of Environmental Management
expressed appreciation for the auditors' efforts to look beneath the surface and offer
criticisms that will be useful in the Department's efforts to improve its operations. Due to
the volume and level of detail of the audit report, DEM responded to what it felt were the
"common areas of concern across programs." In general, DEM agreed with the General
Findings, indicating:
• The Department is evaluating all programs to implement improved procurement,
management, and documentation where feasible.
• The Department has drafted contract file management policies.
• The Department has agreed to research utilizing the County's FRESH project
accounting module for program tracking.
• The Department has agreed to insert language in future contracts to require stricter
documentation of end -use by vendors and to allow on -site observation of vendor
operations by County personnel.
• The Department has written to the State Procurement Office for a determination as
to whether its current diversion grant process sufficiently meets State procurement
criteria.
• The Department has agreed to evaluate staffmg requirements in undertaking
procurement and contract management.
• The Department is agreeable to hiring a consultant for process map development to
assist in improving its overall operations.
While the auditors acknowledge and appreciate the Department's efforts to provide
additional information, the auditors do not feel that the information offered by DEM
substantively affected the content of the audit report. The auditors do offer the following
comments to the Department's response:
Green Waste — The auditors understand the difficulty in obtaining incoming
weights caused by current sites and infrastructure. However, these difficulties and
their solution should be a part of any future plans for addressing green waste. In
response to the Department's statement that it is better to have consistent standards
at all locations, while consistency is definitely desirable, it should not be at the
expense of effective controls. The most effective controls possible should be
implemented with every effort toward standardization at all locations.
DEM states that, at this time, the Department is meeting the State's diversion goals
for green waste. The auditors question how this was determined as the County does
not currently have the capability of accurately measuring green waste entering
processing facilities, much less the total amount of green waste being generated by
residential and commercial sources being dumped illegally or at County transfer
stations.
Further, program budgeting should be performed in sufficient detail to allow for
control through frequent review, complemented by sufficient monthly processing
requirements and limitations at procurement and contracting as well as by adequate
and appropriate ongoing monitoring, control, and reporting. Encumbering smaller
amounts on an incremental basis is not an adequate internal control mechanism.
Household Hazardous Waste — The auditors disagree that the understanding of the
law regarding household hazardous waste communicated in the audit report is
incorrect. The laws are somewhat confusing as a waste identified as "hazardous" is
exempted by reason that it was generated by a household rather than a public or
commercial entity. However, Hawaii Revised Statutes Section 342G- 26(f)(1)
requires that the County's household hazardous waste component include an
assessment of the quantity and type of hazardous wastes generated by residences.
HRS §342G- 26(f)(3) further provides that it shall "develop programs for the
collection of household hazardous wastes that protect the public and the
environment from these substances." It is the auditors' understanding that the
reason that household waste is exempted is due to the difficulty in regulatory
enforcement of individual households, not because the waste does not pose a
significant threat to public health and the environment. The impact of these threats
appears to be even greater in Hawaii County since our waste generated per capita is
approximately double that of the national average.
The Department's response indicates the assumption that auditors suggest the
County should subsidize commercial collection of hazardous wastes. The auditors
did not intend that the County subsidize commercial collection, but rather that the
County pursue provision of permanent collection sites for both commercial and
residential generators, with commercial generators paying a "tipping" or disposal fee
to help support the household hazardous waste program.
AUDIT OF THE COUNTY OF
HAWAI`I'S RECYCLING AND
DIVERSION GRANTS PROGRAM
A Report to the Finance
Committee, County of Hawaii
Conducted and Submitted
by
Legislative Auditor's Office
County of Hawaii
Colleen Schrandt
Lane Shibata
Report No. 01 -06
June 2006
This report is printed on 30% recycled paper.
Foreword
This Report No. 01 -06, Review of Recycling and Diversion Grants Program under the
Department of Environmental Management, was requested by the Hawaii County
Council through Resolution No. 168 -05, Resolution Requesting the Legislative Auditor's
Office to Conduct a Limited Scope Performance Audit of the County of Hawai `i 's
Recycling and Diversion Grants Program. Specifically, auditors reviewed the
Department of Environmental Management's contracts for recycling and diversion
programs funded by County, State and federal grants for Fiscal Years 2004 and 2005.
The audit was conducted pursuant to Council Rule 22, Section 2(d) which provides:
"2. The Legislative Auditor shall, at the discretion of the Council:
(d) Conduct performance and financial audits of the funds,
programs and operations of any agency or operation of the
County when requested by resolution. All audits shall be
conducted in accordance with governmental auditing
standards."
The auditors wish to express their appreciation for the cooperation and assistance
extended to them by the Department of Environmental Management and others contacted
during the course of the audit.
William E. Smith
Deputy County Clerk
Table of Contents
CHAPTER 1 BACKGROUND
Introduction............................................................................................ ..............................2
Laws, Rules, and Plans .......................................................................... ..............................2
Overview of County Facilities and Department of Environmental Management ...............4
AuditObjectives .................................................................................... ..............................6
Scopeand Methodology ........................................................................ ..............................6
CHAPTER 2 GENERAL FINDINGS
Conclusion............................................................................................ .............................13
Recommendations................................................................................. .............................14
SubsequentEvents ................................................................................ .............................18
CHAPTER 3 RECYCLING AND DIVERSION PROGRAM ANALYSIS
DIVERSIONGRANT PROGRAM ..................................................... .............................19
ADF -- GLASS CONTAINER RECOVERY PROGRAM .................. .............................26
H15 -BEVERAGE CONTAINER DEPOSIT PROGRAM ................. .............................40
GREENWASTE PROGRAM .............................................................. .............................45
SCRAPMETAL PROGRAM .............................................................. .............................60
HOUSEHOLD HAZARDOUS WASTE PROGRAM ......................... .............................74
WEST HAWAII MATERIAL RECOVERY FACILITY ................... .............................80
TIRERECYCLING PROGRAM ......................................................... .............................84
EPAGRANTS ...................................................................................... .............................93
PHASE I: KEA`AU RECYCLING AND REUSE CENTER (KRRC) .............93
PHASE II: KEA`AU RECYCLING AND REUSE CENTER (KRRC) ..........101
PHASE III: WASTE REDUCTION AND RECYCLING PROJECT (WEST
HAWAI` I) .............................................. ............................... ............................109
Listing of Tables
Table 1.1 ADF Atlas Recycling ................
Table 1.2 ADF Business Services Hawaii
Table 1.3 Scrap Metal Program ........ I ......
.
Table 1.4 EPA Phase I ..............................
Table 1.5 EPA Phase II .............................
......30
......32
......69
......98
....105
Listing of Exhibits
Exhibits 1.1
Site Characteristics for existing Transfer Stations (FY2006)
Exhibits 1.2
Public Facilities -- Landfills /Transfer Stations
Exhibits 1.3
Audit Sample Schedule of Contracts Reviewed
Exhibits 1.4
Recycling Program Contracts for Fiscal Years 2003 -04 and 2004 -2005
Exhibits 1.5
Island -wide Transfer Station Condition
Exhibits 1.6
Letter of Transmittal to Department of Environmental Management
Exhibits 1.7
Departmental Response to Recommendations
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CHAPTERI BACKGROUND
Introduction
This limited scope performance audit of the Department of Environmental Management, Solid Waste
Division, Recycle and Diversion Grant Program was initiated at the request of the Hawaii County
Council in Resolution No. 168 -05.
Laws, Rules, and Plans
Federal
Solid Waste is regulated on the federal level under Title 40 of the Code of Federal Regulations
(CFR), chapter I, subchapter I, parts 239 to 299, which is administered by the Environmental
Protection Agency (EPA) through its Office of Solid Waste. The EPA's goal for municipal solid
waste management (MSW) contained in the Government Performance and Results Act provides:
"By 2005, facilitate source reduction to reduce MSW generation to 4.3 lbs /person/day
and facilitate increased recycling, including composting, to divert at least 35 percent
of MSW from landfilling and combustion by 2005."
State
In 1991, the "Hawai`i Integrated Solid Waste Management Act" was enacted and codified in chapter
342G of the Hawaii Revised Statutes. The Act mandates that source reduction, recycling, and
bioconversion be given the highest priority by the State and counties in designing and implementing
their respective solid waste management plans and systems.
FIRS §342G -2, "Solid waste management priorities," provides:
"(a) This chapter shall be known and may be cited as the 'Hawai'i Integrated Solid
Waste Management Act.'
(b) In implementing this chapter, the department and each county shall consider the
following solid waste management practices and processing methods in their
order of priority:
(1) Source reduction;
(2) Recycling and bioconversion, including composting; and
(3) Landfilling and incineration.
The respective roles of landfilling and incineration shall be left to each county's
discretion.
CHAPTER BACKGROUND
(c) In implementing this chapter, the department and each county shall consider the
minimization of litter and illegal dumping as a design factor in the development
of integrated solid waste management programs."
HRS §342G -3, "Goals," provides, in pertinent part:
"(a) It is the goal of the State to reduce the solid waste stream prior to disposal by:
(1) Twenty -five per cent by January 1, 1995; and
(2) Fifty per cent by January 1, 2000;
through source reduction, recycling, and bioconversion. Where feasible, the office shall
establish other state goals for specific commodities, recognizing market
considerations."
HRS §342G -12 provides for the establishment of the Office of Solid Waste Management within the
State Department of Health (DOH).
HRS chapter 342G, part III, "Integrated Solid Waste Management Planning," establishes the
requirement that each county develop an "integrated solid waste management plan," and sets forth the
process for obtaining DOH plan approval including minimum program component requirements and
schedules for plan submission. The program components that directly relate to the scope of this audit
are set forth in:
HRS §342G- 25(b)(2) -
Source reduction
HRS §342G- 25(b)(3) -
Recycling and bioconversion
HRS §342G- 25(b)(5) -
Special waste
HRS §342G- 25(b)(6) -
Household hazardous waste
HRS §342G- 25(b)(7) -
Public education and information
HRS §342G- 25(b)(10) -
Program implementation
HRS §342G- 25(b)(11) -
Program funding.
HRS § 10313-1 02(b)(2)(A) and (I) of the Hawaii Procurement Code provide:
"(b) Notwithstanding subsection (a), this chapter shall not apply to contracts by
governmental bodies:
(2) To disburse funds, irrespective of their source:
(A)For grants or subsidies as those terms are defined in section 42F -101,
made by the State in accordance with standards provided by law as
required by article VII, section 4, of the State Constitution; or by the
counties pursuant to their respective charters or ordinances...
(I) For contracts awarded in accordance with chapter 103F...."
Hawaii Administrative Rules (HAR), Title 11, Chapter 58.1, "Solid Waste Management Control,"
establishes minimum standards governing the design, construction, installation, operation, and
maintenance of solid waste disposal, recycling, reclamation, and transfer systems.
3
CHAPTER BACKGROUND
County
The County's "Integrated Solid Waste Management Plan" ( ISWMP) was adopted by the County
Council on October 5, 1994 (in Resolution No. 291 -94). The Updated ISWMP was adopted by the
Council on November 20, 2002 (in Resolution No. 238 -02), and approved by DOH on April 7, 2003.
The stated objectives of the Updated ISWMP are to:
• "Outline needed changes in Hawaii County's solid waste system;
• Select systems and programs from available alternatives for solid waste management that will be
cost - effective, efficient, and convenient for the users, and;
• Outline the basic steps necessary to implement the needed changes in the system."
The plan states: "This ISWMP is a general planning document to provide the basis for improving
and updating the county's solid waste management system."
Overview of County Facilities and Department of Environmental Management
County Solid Waste Facilities
The County's current solid waste handling infrastructure includes two landfills, the East Hawaii
Landfill located in South Hilo and the West Hawaii Landfill located in Pu`uanahulu, and 21
convenience centers located throughout the County (See Exhibit 1.1). HAR §11-58.1-03 defines
"convenience centers" as "waste handling facilities performing limited transfer station operation
located at convenient areas receiving less than forty tons per day of only household or residential
solid waste." Pursuant to HAR §11- 58.1 - 04(1)(1), 20 of the 21 convenience centers (commonly
referred to as "transfer stations ") are currently permitted by DOH under "permit by rule" for solid
waste handling and disposal facilities of limited impact. The Miloli`i Station is not currently
permitted by DOH due to lack of zoning approvals for the site.
The use of County "transfer stations" is limited to "household rubbish" or "household refuse."
Hawaii County Code §20 -31 defines "transfer station" as "a facility designed to collect household
rubbish from the surrounding community and to transport this refuse to a suitable disposal facility."
It defines "household rubbish" as "all rubbish, including any material not exceeding four feet in
length at its longest dimension, which is normally generated by a family's activities at their place of
residence." Hawaii County Code §20- 43(b)(1) further provides:
"(b) Acceptance at transfer stations.
(1) All acceptable household refuse, including shrubbery and yard trimmings,
deposited into the transfer station solid waste container shall be accepted by
the County for disposal on any day during normal working hours of the
station. No item shall exceed four feet in any dimension or weigh more
than fifty pounds."
4
CHAPTER t BACKGROUND
The County's Updated ISWMP dated December 2002 indicates that approximately 42 percent of the
waste stream entering County landfills was from transfer stations in 2000. Exhibit 1.2 reprinted from
the Updated ISWMP indicates that two new transfer stations are planned. However, there is no
further discussion in the Updated ISWMP relating to these additional facilities or related timelines
and costs for their implementation. No new transfer stations have been permitted or placed into
operation at the conclusion of audit fieldwork in April 2006.
Department of Environmental Management
In December 2000, the Department of Environmental Management (DEM) was established by charter
amendment to assume the enormous responsibility of management, oversight, and operations of all
solid waste and wastewater functions formerly performed by the Department of Public Works
(Hawai`i County Charter §6 -5.1). The 2000 charter amendment also provided for the establishment of
an Environmental Management Commission to act as an advisory body to the department, with
commission members appointed by the Mayor and confirmed by the County Council (Hawai`i
County Charter §6 -5.5).
DEM did not have permanent staff until August of 2002 when Director Barbara Bell and
administrative assistant Sharon Henry were hired. The department was organized into two divisions:
Solid Waste and Wastewater. The Solid Waste Division is divided into the "Operations Group" and
the "Special Programs Group." The Operations Group is responsible for solid waste collection and
disposal facilities in the County including the two landfills, 21 transfer stations, and island -wide
hauling operations, utilizing County personnel and privately contracted services. The Special
Programs Group is responsible for management of programs relating to waste stream reduction,
diversion, recycling, and reuse for the County, utilizing County personnel and privately contracted
services.
The Solid Waste Division has experienced continual transition with the retirement of its first chief
Larry Capellas in January 2003, the appointment of Bobby Gonsalves as acting chief through
September 2003, the assumption of the position by Lono Tyson until his resignation in July 2005,
which was followed by the appointment of Michael Dworsky in September 2005.
Special Programs Group
The Solid Waste Division had been newly established just prior to the audit period (July 1, 2003 to
June 30, 2005). Several recycling and diversion programs established and operated under the
Department of Public Works were assumed by the Solid Waste Division, with the Special Programs
Group currently responsible for all recycling and diversion programs island -wide. The Special
Programs Group is further divided into two functional areas: the Recycling Section headed by a
Recycling Coordinator, and the Abandoned Vehicle Section which is tasked with removal and
disposal of derelict vehicles found on publicly accessible roadways.
Special Programs Recycling Coordinator Eileen O'Hora -Weir did not assume her position until May
2003, and has since vacated the position effective April 28, 2006. A student helper hired in January
CHAPTERi BACKGROUND
2003 was transitioned to a full time Recycling Specialist I in June 2005. Two temporary Recycling
Specialist II positions specifically dedicated to the HI5 Beverage Container Deposit Program were
filled in January 2005, and are assisted by a student helper.
During the audit period, the Special Programs Group was responsible for administering
approximately 12 recycle /diversion programs, comprised of roughly 70 contracts, as well as three
EPA pilot projects and one facility design project.
Audit Objectives
In its Resolution No. 168 -05, the County Council identified the scope of this performance audit to
include, but not be limited to, the following objectives:
1. To examine a sample of the significant contracts for Department of
Environmental Management's Recycling and Diversion programs during the
fiscal years 2004 and 2005.
2. To review the bidding process, contract award, monitoring process and oversight
requirements of these recycling contracts.
To review policies and procedures of the Department of Environmental
Management for adequate safeguards on grant administration.
4. All auditing shall be done in accordance with governmental auditing standards as
outlined in Rule 22, Council Rules...
[T]he Legislative Auditor's Office may conduct further examination into concerns that may arise
during the course of the review beyond the scope and objectives listed above...."
Scope and Methodology
This limited scope performance audit focused on DEM's Special Programs Group and its activities
relating to recycling and diversion contracts. Our audit sample consisted of all recycling and
diversion contracts in excess of $100,000 issued from July 1, 2003 through June 30, 2005, which
totaled $6,726,963 (See Exhibit 1.3). The sample was drawn from a summary report provided by
DEM of all recycling and diversion contracts issued for the fiscal years 2003 -2004 and 2004 -2005
(See Exhibit 1.4). Audit fieldwork was conducted from December 2005 through April 2006, in
accordance with generally accepted government auditing standards.
While the audit focused on the DEM Special Programs Group, portions of fieldwork included
consideration of the larger DEM Solid Waste Division, other County departments, the County
administrative and legislative branches, and the State Department of Health, but only as they related
to the Special Programs Group and its operations and administration.
6
CHAPTER BACKGROUND
In conducting the audit, the audit team reviewed pertinent ordinances, laws, rules, and prior audits
pertaining to the County's recycle and diversion programs. Auditors reviewed departmental programs
for compliance with applicable County, State, and federal laws, rules, regulation, and requirements,
and assessed management controls relevant to the objectives of the audit. Auditors reviewed
departmental policies, procedures, contracts, reports, communications, and other related data to
evaluate the existence and effectiveness of internal controls, compliance with governmental permit
and contractual requirements, and monitoring of departmental and contractor performance.
Additionally, the audit team interviewed departmental personnel and contractors and made site visits
to County facilities and contractor operations. The objectives of the audit did not encompass
assessment of the effectiveness and/or efficiency of the Department of Environmental Management
as a whole, or assessment of the efficacy of DEM's Recycling and Diversion Grants Programs
relative to other counties and states. However, the audit team would recommend that future audits of
this scope be considered.
Due to the quantity and diversity of programs audited, the audit team has structured the report to
begin with "General Findings" in Chapter 2. The General Findings reflect the broad and pervasive
issues that auditors feel have negatively impacted the County's efforts to address recycling, reuse,
diversion, and reduction of solid waste streams on Hawaii Island. The General Findings also reflect
issues underlying specific program findings or issues that permeated multiple programs included in
the audit sample, and are followed by general conclusions and recommendations. The Recycling and
Diversion Program Analysis in Chapter 3 discusses the individual recycling and diversion programs
and their respective contracts and includes findings and recommendations specific to those programs.
Internal Control
Chapter 7.11 of the "Government Auditing Standards" Revised Yellow Book states:
"The lack of administrative continuity in government units because of changes in
elected legislative bodies and in other government officials increases the need for
effective internal control. Auditors should obtain an understanding of internal control
significant to the audit objectives and consider whether specific internal control
procedures have been properly designed and placed in operation."
Chapter 7.10 (c) further states:
"Internal control, often referred to as management controls, in the broadest sense
includes the plan of organization, methods, and procedures adopted by management to
meet its mission, goals, and objectives. Internal control includes the processes for
planning, organizing, directing, and controlling program operations. It includes the
systems for measuring, reporting, and monitoring program performance. Internal
control also serves as the first line of defense in safeguarding assets and preventing
and detecting errors, fraud, and violations of laws, regulations and provisions of
contracts and grant agreements."
7
CHAPTER 1 BACKGROUND
The objectives of Internal Control as referenced in Chapter 7.12 are:
• Effectiveness and efficiency of program operations.
Controls over program operations include policies and procedures that have been
implemented to reasonably ensure that a program meets its objectives and that
unintended actions do not result.
• Validity and reliability of data.
• Compliance with applicable laws, regulations, and provisions of contract and grant
agreements.
8
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CHAPTER 2 GENERAL FINDINGS
Finding
I. The amount of municipal solid waste generated per capita per day in Hawaii County
greatly exceeds the national average.
• In fiscal year 2003 -2004, the Hawaii County average of municipal solid waste was 8.25
pounds per capita per day compared to the EPA's reported national average of 4.5 pounds per
capita per day.
+ In fiscal year 2004 -2005, the Hawaii County average of municipal solid waste increased
approximately 13.7 percent to 9.38 pounds per capita per day.
• In fiscal year 2004 -2005, the Hawaii County average of landfilled waste was approximately
7.59 pounds per capita per day, which represents an increase of approximately 9 percent from
the 6.96 pounds per capita landfilled in fiscal year 2003 -2004.
2. The Updated ISWMP is not utilized as the mechanism to keep the County and DEM on a
focused and efficient path to effectively manage its solid waste streams.
• The Updated ISWMP does not reflect the current reality of the County's solid waste
management infrastructure. For example, the 2002 Updated ISWMP plan provides for:
• Establishment of the DEM -Solid Waste Division as a "Utility Enterprise" in fiscal year
2003 -2004.
• Construction of an East Hawaii Sort Station during fiscal years 2003 -2004 and
2004 -2005.
• Hauling of East Hawaii residual waste to the Pu`uanahulu landfill beginning fiscal year
2004 -2005.
• Phase -in of landfill bans on recyclable construction and demolition wastes in fiscal year
2004 -2005.
• Establishment of drop -off centers at municipal shopping centers during fiscal years
2004 -2005 and 2005 -2006.
• Upgrade of transfer stations to include drop -off centers by fiscal year 2005 -2006 (this
provision was carried forward from the 1993 ISWMP).
• Establishment of solid waste fees as part of County real property tax billings in fiscal year
2006 -2007.
3. DEM's internal controls are inadequate.
• The department lacks formal policies and procedures for ongoing assessment of the condition
and effectiveness of the County's solid waste management infrastructure as well as a formal
maintenance schedule for said infrastructure.
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CHAPTER 2 GENERAL FINDINGS
• The department does not have performance or benchmarks in place which would readily
allow for an effective and efficient internal review process.
• The department lacks formal policies and procedures for ongoing measurement of waste
stream flows, including accurate and verifiable data collection and reporting methods.
• The department does not conduct regular management meetings as a mechanism to facilitate
timely review and communication of program status and current issues.
• The department lacks formal policies and procedures in the areas of program planning and
management, file and document management, and intra- and inter - departmental reporting and
communication.
• The department did not include sufficient provisions in its program guidelines to ensure
adequate monitoring of County and contractor compliance with governmental laws, rules,
regulations and requirements for permit application, approval, and renewal.
• The department has failed to timely respond to regulatory agency warning letters and
notices of violation, and has been unable to implement and operate its recycling and
diversion programs in accordance with contractual and governmental permit timelines.
As a result, the County is at risk for possible permit revocation and /or financial penalties.
• The Miloli`i transfer station continues to be operated without necessary permits. In a
communication to DEM dated March 7, 2005, DOH advised that this is in violation of
HRS 342H -30 (b) and HAR §11-58.1-04, and the County may be subject to enforcement
actions and penalties of up to $10,000 per day per violation.
• The department personnel and contractors are not fully acquainted with program
guidelines and permit requirements.
• In the absence of reporting procedures, program and budget responsible personnel do not
receive the operational and financial information necessary for effective and proactive
management.
• The department lacks formal policies and procedures for contract procurement and oversight.
• The department may have circumvented and violated procurement laws in its issuance of
grants.
• The department did not include sufficient controls and protections in its procurement and
contract documents to reduce the risk of contractor abuse and/or fraud and County
exposure to violations of governmental regulations.
The department does not sufficiently train incoming supervisory and management personnel
in the areas identified above which has resulted in reliance on poorly formulated program
guidelines, procurement and contract documents, and operational procedures.
o The department has not ensured that personnel responsible for program design and
contracting have sufficient knowledge and experience to ensure that adequate controls and
protections are included in procurement and contract documents to reduce risk of
contractor abuse and/or fraud and County exposure to acceptable levels.
The department does not sufficiently prioritize the need for program and contractor
evaluation to attain its internal control objectives:
10
CHAPTER 2 GENERAL FINDINGS
• Current monitoring and control procedures are reactive rather than proactive, resulting in
costly corrective measures.
• Current protocol does not include regular and timely reporting and review of program and
contractor performance.
• Current protocol does not include regular monitoring of program and contractor
compliance with applicable federal, State, and County permit requirements and funding
agency requirements.
• Current tracking of budgets and expenditures related to the Special Programs Group is
inadequate and does not readily allow for tracking of contract specific costs and payments.
[However, DEM accountant Robin Bauman advises that steps to address this deficiency
have been implemented after the audit period. Specific budget accounts have been created
for the Special Programs Group. However, the capability to track and report at program or
contract levels is still lacking.]
• Current tracking of contract- and program - related expenditures is done outside of the
County's FRESH accounting system, and utilization of the FRESH project accounting
module has not been implemented.
4. DEM has not been effective or efficient in its application for and utilization of government
funding.
• The department did not pursue EPA funding for fiscal year 2006 -2007 to permit further
development of its waste recycling and diversion capabilities. Meanwhile, non - profit agency
Hawaii Island Economic Development Board did pursue EPA funding and was granted
$500,000 for this purpose.
• The County was awarded $250,000 in Community Development Block Grant (CDBG) funds
for fiscal year 2003 -2004 for upgrade and repair of its transfer stations. However, according
to DEM Director Barbara Bell, no funds were expended for this project until fiscal year
2005 -2006, and as a result, the County was excluded from pursuing additional CDBG funding
in fiscal year 2004 -2005. As of April 2006, DEM has completed its initial assessment of the
condition of all County transfer stations and ranked them as to priority for repair. This initial
assessment does not include any cost estimates for repair of existing facilities, nor does it
include any consideration for upgrading facilities to allow for recycling and diversion. The
self - assessment rates 13 of the 21 transfer stations as "Failed" (See Exhibit 1.5).
• The department's issuance of multi- tiered EPA contracts and subcontracts resulted in a
significant percentage of grant monies being expended on program administration rather than
on actual recycling and diversion operations.
5. DEM's managerial deficiencies were exacerbated by external influences in County
government.
There appears to be a lack of common vision in County government for solid waste
management, waste stream diversion, and recycling and reuse. The administrative and
legislative branches of County government have not reached consensus as to long -term
solutions for addressing Hawaii County's solid waste streams. This lack of commitment and
11
C HAPTER 2 GENERAL FINDINGS
lack of a cohesive plan have been detrimental to DEM's ability to effectively implement its
goals. As a result, the County has been confronted with:
• Reactionary rather than proactive planning and management of the County's solid waste
streams.
• Delayed implementation of cost effective alternative solutions such as waste -to- energy
technologies which has accelerated the closure of the South Hilo landfill and severely
limited interim options and solutions.
• Delayed implementation of user - friendly recycling and reuse facilities throughout the
County.
• Increased costs for facility construction due to delays in decision- making.
• The Updated ISWMP lacks an accompanying "working plan" which clearly delineates the
detailed tasks required to attain the County's solid waste management goals, assigns
responsibility and timelines for completion of tasks, and establishes a mechanism for regular
and frequent progress review.
• DEM experienced increased program costs, reduced program options, and other economy -of-
scale issues related to the County's geographical location, the size of its land area, and its
population distribution.
• DEM assumed ongoing recycling and diversion programs and contracts from the Department
of Public Works in 2000, including:
o Deteriorated solid waste facilities caused by funding shortfalls in the 1990's.
• Existing programs and contracts deficient in reporting requirements and control
mechanisms.
• DEM experienced difficulties inherent in the establishment of a new department with new
personnel.
• DEM experienced transitional problems due to implementation of a new county -wide
financial accounting system (FRESH) by the Department of Finance in 2004.
• DEM would have benefited from greater assistance from other County departments with
specific knowledge and expertise in the preparation of procurement and contract documents to
determine whether:
o Contracts were exempt from County and State procurement laws.
o Non - profit and for - profit entities were both eligible for grant awards.
a Sufficient provisions were included to ensure:
■ Program effectiveness and efficiency.
■ Reliability and validity of data.
■ Compliance with applicable laws, regulations, and provisions of contract and grant
agreements.
■ The County's right to audit and its enforcement authority.
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CHAPTER 2 GENERAL FINDINGS
6. DEM's managerial deficiencies were exacerbated by external influences in State
government.
Although the State legislature has adopted specific goals, requirements, and timeframes
relating to solid waste reduction, recycling, and diversion as codified in HRS Chapter 342G,
the State's commitment to and compliance with statutory requirements are unclear.
• The State Department of Health provided insufficient guidance and monitoring of recycling
programs under its regulation and control, particularly in the start up of its HI5 Beverage
Container Deposit Program.
7. The ineffectiveness of DEM's internal controls may have increased the County's exposure
to governmental sanctions and civil liabilities.
Conclusion
According to the department's annual report, the Recycling and Diversion Grant Programs
administered by the Special Programs Group have collectively achieved a 19.1 percent diversion rate
from County landfills for fiscal year 2004 -2005. However, as reported in the Findings above, the
amount of landfilled waste per capita in the County actually increased by about nine percent in fiscal
year 2004 -2005 to approximately 7.59 pounds per person per day versus EPA's target of less than 4.5
pounds per person per day. Also, as noted in the Introduction above, EPA's goal was to achieve a
diversion rate of 35 percent from landfilling and combustion by 2005.
The County's lack of a clear commitment to address its solid waste streams has resulted in a system
reliant on insufficient, outdated, and deteriorated infrastructure which does not permit compliance
with current laws requiring certain solid and hazardous wastes to be banned from County landfills
and prioritization of source reduction, recycling, and bioconversion over landfilling and incineration.
The County must promptly revise and implement its Updated Integrated Solid Waste Management
Plan, and not abandon that responsibility to future administrative and legislative branches of County
government. The County Code needs to be reviewed and revised in order to provide adequate
protections, remedies, and authority to enforce compliance with regulatory and contractual
requirements.
The Department of Environmental Management needs to better manage its Special Programs Group
by adopting a best practices approach rather than an ad hoc approach when outsourcing its recycling
and diversion programs and closely monitoring contracts for cost effectiveness and expense
reconciliation. DEM needs to implement oversight procedures to ensure compliance with all permit
and regulatory requirements. Specific benchmarks and timelines need to be developed for each
program against which departmental and contractor performance can be measured on an ongoing
basis. The department also needs to immediately address deficiencies in file and document
management, intra- and inter - departmental communication and reporting, and training of its
personnel. Formal written policies and procedures should be developed for all of the aforementioned
program components.
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CHAPTER 2 GENERAL FINDINGS
Accurate evaluation of the effectiveness and efficiency of current solid waste management systems
and special programs cannot presently be accomplished due to lack of verifiable data related to:
• Outsourced Diversion and Recycling Programs
o Poorly formulated vendor requirements and procedures and inadequate control measures
do not ensure the accuracy of data collected or permit the corroboration of quantities and
weights claimed as diverted.
Transfer Stations
• While the Updated ISWMP states that at least 42 percent of the County's solid waste
disposed of at landfills is collected at transfer stations, the County has not designated the
upgrading of transfer stations as a high budget priority. The County needs to demonstrate
its commitment by implementing a viable solution for segregation, reduction, diversion,
and recycling of the County's waste stream.
• Banned and recyclable wastes continue to be disposed of in collection trailers, and
subsequently transferred to landfills due to:
■ Inadequate or non - existent receptacles to collect recyclables and segregate hazardous
or banned wastes, exposing the entire waste stream to contamination with hazardous
materials.
■ No monitoring of wastes disposed.
■ No sorting of wastes presented in plastic bags.
■ No regular staffing or security at transfer sites.
Recommendations
1. We recommend that the Mayor and County Council, in consultation with DEM, revise and
adhere to the Updated ISWMP as the long -term plan for addressing the County's solid
waste streams.
• There needs to be a County -wide commitment for implementation of and adherence to a long-
term solid waste management plan on the part of all stakeholders, including the Mayor, DEM,
County Council, and the recycling public, regardless of changes in elected officials.
o The County should consider codifying the "agreed" upon long -term solid waste
management plan.
If the Updated ISWMP is to represent the County's strategic plan for solid waste
management, it needs to be further updated and revised to address at a minimum:
• The priority, in quantifiable measures, of recycling and diversion in the County's solid
waste management system.
• Specific goals pertaining to solid waste reduction, recycling, and diversion, and specific
timelines for attaining said goals.
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CHAPTER 2 GENERAL FINDINGS
2. We recommend a detailed "working plan" be developed to drive and guide implementation
of the Updated ISWMP and should include, but not be limited to:
• An outline and schedule of specific tasks and benchmarks required to attain Updated ISWMP
goals.
• An assignment of stakeholder responsibility for completion of specific tasks and benchmarks.
• A mechanism for regular and frequent review and reporting of stakeholder progress by a body
reporting to the legislative branch.
• Standardized criteria for evaluation of solid waste management programs, technologies, and
funding sources.
• An evaluation of regulatory constraints to implementation of identified solid waste
management programs and technologies.
• A timeline and prioritization schedule for implementation of identified solid waste
management programs and technologies.
• A standardized process for determining whether implementation and operation of identified
programs and technologies should be managed by County personnel or outsourced to a private
contractor.
• A standardized policy and procedure setting forth departmental controls to be implemented
and identifying which departmental personnel will be responsible for program oversight.
• A standardized process for reviewing and evaluating the County's, DEM's, and the
contractor's responsibilities and obligations under specific contracts, including monitoring of
regulatory compliance and data reporting accuracy.
• Standardized policies, procedures, and safeguards necessary to reduce the County's risk to
contractor abuse and /or fraud to acceptable levels.
• An evaluation of legislative or governmental authority available to the County for contract
enforcement purposes.
• Incorporation of public input into plan development and participation in future recycling and
diversion programs and technologies.
3. We recommend that DEM evaluate areas of possible risk and exposure and develop and
implement written policies and procedures to reduce said risk and exposure.
• Consult with the Finance Department and Corporation Counsel on development of a risk
management policy to limit the County's exposure to governmental sanctions and civil
liabilities.
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CHAPTER 2 GENERAL FINDINGS
• Consult with other County departments and State agencies to establish "best practices" in
order to minimize its risk and exposure to governmental sanctions and civil liabilities.
Immediately transmit any and all communications received from governmental agencies
regarding possible regulatory violations or sanctions to the Mayor, Managing Director,
Finance Director, Corporation Counsel, and County Council.
Develop formal written policies and procedures for general departmental administration as
well as individual program management, including, but not limited to:
• A file management system for departmental and contractor documents, reports, plans, and
other related information to ensure that program files are current and complete.
• A communication management system for intra- departmental, inter - departmental, and
public communications to ensure adequate and timely response to and appropriate
dissemination of any inquiry or complaint.
• A program tracking system to monitor departmental and vendor compliance with all
contractual, permit, and regulatory requirements related to solid waste management.
• A account tracking system to monitor contractor billings and payments by utilizing the
project accounting module within the County's FRESH accounting system.
• A formal process and schedule for periodic assessment and review of program and
departmental effectiveness and efficiency in achieving objectives contained in the
County's Updated ISWMP, the State's Hawaii Integrated Solid Waste Management Act,
and federal EPA guidelines.
• A formal process and schedule for monitoring changes to County, State, and federal laws,
rules, regulations, and requirements.
• Re- evaluate its organizational structure, staffing, and position descriptions, determine
program components and personnel necessary to carry out effective and efficient operations,
and implement necessary changes to ensure that internal controls and staffing levels are
sufficient to meet program demands.
• Develop departmental and division "process maps" to aid in evaluating the adequacy of
staffing levels.
• Review current staffing competencies and expertise to ensure that staff are qualified to
perform their required duties.
• Implement internal training programs to ensure that staff are competent and
knowledgeable in the performance of their duties.
o Ensure that staff have sufficient time and resources necessary to effectively perform their
duties.
o Reallocate positions as necessary.
o Analyze the cost- benefit of hiring additional County personnel versus continuing to
outsource the recycling and diversion programs.
• If the department determines that it cannot remedy the foregoing deficiencies within the next
six months, DEM should consider procuring a private consultant to assist in "process map"
development, restructuring, development of internal management policies and procedures,
and training of its personnel as discussed above.
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CHAPTER 2 GENERAL FINDINGS
4. We recommend that DEM consult with the Finance Department and the Corporation
Counsel to develop written policies and procedures relating to procurement and
contracting.
• Develop formal written policies and procedures related to contract procurement, including
timing of the procurement process, eligibility of contractors and subcontractors, evaluation of
contractors and subcontractors, and drafting of procurement and contract documents. Contract
provisions should address reducing County exposure to contractor fraud and/or abuse by
clearly delineating any process and reporting controls as well as the County's right to audit
contractors and subcontractors. Contract provisions should clearly state that the County's
right to audit is not limited to examination of contractor records, and may include, but not be
limited to, site access, inspection, and process observation.
• Develop formal written policies and procedures to ensure proper timing, review, recordation,
and maintenance of transactions relating to contractor billings and payments in accordance
with County policy and generally accepted accounting principlgs.
• Develop formal written policies and procedures related to the award of grant monies to non-
profit and for -profit entities.
5. We recommend that the County Council adopt an ordinance to clearly establish the
County's authority to audit any entity with which it contracts, regardless of whether the
procurement is subject to or exempt from State and County procurement code provisions.
6. We recommend that DEM evaluate and implement processes and procedures to provide
departmental capabilities for regular and continuous measurement of the volume of various
waste types entering and being diverted from the County's solid waste system.
7. We recommend that DEM include accurate descriptions and measurements of the volumes
of specific waste types to be processed under each procurement and contract document, as
well as specific requirements for diversion, recycling, and /or reuse of waste types under
each procurement and contract document.
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CHAPTER 2 GENERAL FINDINGS
Subsequent Events
In a letter to the audit team dated May 24, 2006, Aaron Fujioka, Administrator of the State
Procurement Office, stated:
"This is in response to your May 19, 2006 request pertaining to applicability of
HRS Chapter 103D, the procurement code regarding grants'. The procurement
code provides exemptions for `grants' as follows:
§103D -102 (b) (2) (A)
For grants or subsidies, as defined in HRS Chapter 42F made by the state, or
by the counties pursuant to their respective charters or ordinances; or
§103D- 102(b)(2)(I)
Pursuant to HRS Chapter 103F, for contracts to provide health and human
services. Act 169, SLH 2005 amended section 103F -101, to, allow the counties
to utilize Chapter 103F to purchase health and human services.
We view appropriated funds, which do not specify a named recipient or provider,
to be subject to compliance with the procurement code, unless addressed by county
charter or ordinance. "
If this State Procurement Office's interpretation is, in fact, correct, the impact on the County could be
significant. Therefore, we reiterate the importance of obtaining a legal determination and clarification
of the following issues:
• Does the County have authority to grant funds to both non -profit and for - profit entities?
• Does County Code chapter 2, article 25 provide that the only "grants" permitted to be
awarded by any branch of the County are the $900,000 in annual grants awarded by the
Council directly to specific non - profit entities?
• When is a grant appropriate, what are the grant criteria, and how and by whom must a grant
be approved?
• Does adoption of a departmental budget by ordinance give the department authority to grant
funds? if so, is the procurement exempt from State and County procurement codes?
18
CHAPTER 3 RECYCLING AND DIVERSION PROGRAM ANALYSIS
DIVERSION GRANT PROGRAM
Statutory Authority
Hawaii Revised Statutes (HRS) chapter 342G is cited as the "Hawai`i Integrated Solid Waste
Management Act.
• HRS §342G -26(c) provides, in pertinent part: "For recycling, the counties shall assess the
type and amount of solid waste that it is technically feasible to recycle, giving consideration at
a minimum to clear glass, colored glass, aluminum, steel and bimetallic cans, high -grade
office paper, newsprint, mixed paper, corrugated paper, HDPE, PET, and green waste."
HRS §342G -3(a) provides:
"It is the goal of the State to reduce the solid waste stream prior to disposal by:
(1) Twenty -five percent by January 1, 1995; and
(2) Fifty per cent by January 1, 2000;
through source reduction, recycling, and bioconversion. Where
feasible, the office shall establish other state goals for specific
commodities, recognizing market considerations."
HRS chapter 103D is known as the "Hawai`i Public Procurement Code," or the State procurement
code.
HRS § 10313- 1 02(b)(2)(A) provides in pertinent part:
"(b) Notwithstanding subsection (a), this chapter shall not apply to contracts by
governmental bodies:
(1) To disburse funds, irrespective of their source:
(A) For grants or subsidies as those terms are defined in section 42F-
101, made by the State in accordance with standards provided by
law as required by article VII, section 4, of the State Constitution;
or by the counties pursuant to their respective charters or
ordinances..."
• The Purchasing Division and the Corporation Counsel have interpreted
HRS §103D- 102(b)(2)(A) to mean that any grants issued by the County are exempt from the
State procurement code as they are governed by the County's Charter or Ordinances.
However, Hawaii County Code chapter 2, article 25 appears to address only grants made by
the County Council directly to non - profit organizations.
19
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
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Chapter 3 DIVERSION GRANT PROGRAM
and $5,000 for plastics. DEM issued the contract for processing of plastics even though the
contractor's processing site was not permitted for accepting or processing of plastics.
Supplementary Contract No. 1 dated November 23, 2004, provided for an additional $15,000 for
diversion of paper fibers. The supplementary contract was issued when the quantity of paper fibers
collected exceeded projected amounts for the semi - annual period July 1, 2004 to December 31, 2004.
It was understood and agreed upon between the County and BSH that the combined contract amount
of $65,000 could not be exceeded unless additional funds were allocated by written agreement.
Contract No. 000301 dated March 24, 2005, covered the second semi - annual period January 1, 2005
to June 30, 2005, in an amount not to exceed $63,000. Contract terms for the reuse or recycling of
commodities to an on- island or off -island market remained unchanged: $40 per ton for office
(computer, white or colored ledger) paper, cardboard, and other paper not previously described, and
$160 per ton for plastics. The total grant amount was specifically allocated as follows: $58,000 for
paper fibers and $5,000 for plastics.
Atlas Recycling
Contract No. 000139 dated September 14, 2004, between the County of Hawaii and Atlas Recycling,
for the period July 1, 2004 to December 31, 2004, was issued for the diversion of paper products, at a
rate of $40 per ton, in an amount not to exceed $50,000.
Supplemental Contract No. 1 dated November 23, 2004, for the period July 1, 2004 to December 31,
2004, was issued to provide for diversion of additional paper product tonnage, at a rate of $40 per
ton, in an amount not to exceed $25,000.
Contract No. 000317 dated April 22, 2005, for the period January 1, 2005 to June 30, 2005, was
issued for the diversion of paper products, at a rate of $40 per ton, in an amount not to exceed
$68,000.
Atlas Recycling reported and was paid for 3,320.33 tons of diverted paper products for fiscal period
July 1, 2004 to June 30, 2005. However, documentation accompanying contractor claims reports did
not provide commodity source information. Also, the sale of paper products to an off - island end
purchaser was documented by a typed list of container numbers and corresponding weights on
purchaser Island Recycling's letterhead, but no documentation of payment was provided. These may
not be "arms length" transactions, since James Nutter, the principal officer of purchaser Island
Recycling, and Michael Allen, owner of seller Atlas Recycling, are the principals of Big Island Scrap
Metal, Inc. The auditors recommend the County pursue legislation requiring disclosure of all "related
parties" or "conflicts of interest" with respect to County procurements. This is not to say that these
relationships are inherently problematic. However, disclosure combined with proper controls will
offer greater protections to both the County and the contractor and reduce the perception or
possibility of impropriety.
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Chapter 3 DIVERSION GRANT PROGRAM
Finding
f. DEM issued contracts to vendors to process materials for which the vendor did not hold
proper DOH permits.
A permit violation letter from DOH to BSH dated November 8, 2004, required the contractor
to submit an application within 30 days to modify its permit to reflect a new glass crushing
location and operation and to include its plastics operation. DEM's program file contains no
documentation as to resolution of the violation or corrective actions taken by the contractor or
the department.
A warning letter from DOH to BSH dated February 22, 2005, instructed the contractor to
cease accepting, processing, and storing of plastic bottles at its Auwae Road facility and to
remove all stored bottles to its new Kea`au facility. DEM's program file contains no
documentation as to resolution or corrective actions taken by the contractor or the department.
2. The exemption of Diversion Grant Program contracts from State and County procurement
laws is unclear.
• It is unclear whether the contracts issued for the Diversion Grant Program are exempt from
the State procurement code under HRS §103D- 102(b)(2)(A), as grants issued from
departmental budgets to for - profit entities are not addressed by Charter or Ordinance.
It is unclear whether grant contracts issued by the County are limited to the $900,000
allocated annually for grant by the County Council directly to non -profit organizations to
support programs of public benefit under Hawaii County Code chapter 2, article 25.
3. Contracts were not timely issued with contractors commencing diversion activities prior to
finalization of contracts and issuance of notices of award.
• Contract No. 000 13 9, for the semi - annual period July 1, 2004 to December 31, 2004, was not
fully executed until September 14, 2004. However, documentation attached to invoices
shows that work was being performed without a fully executed contract from July 1, 2004 to
September 13, 2004. Query: How did the grantee know that it would be awarded the grant
contract? Why was the contractor allowed to perform work without a signed contract? Why
is there such a long delay before a contract is issued?
• Contract No. 000143 for the semi - annual period July 1, 2004 to December 31, 2004, was not
signed until September 14, 2004. However, documentation attached to invoices shows that
work was being performed without an executed contract from July 1, 2004 to September 13,
2004. See above query.
+ Contract No. 000301 for the semi - annual period January 1, 2005 to June 30, 2005, was not
signed until March 24, 2005. However, documentation attached to invoices shows that work
was being performed without an executed contract from January 1, 2005 to March 23, 2005.
See above query.
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Chapter 3 DIVERSION GRANT PROGRAM
• Contract No. 000317 for the semi - annual period January 1, 2005 to June 30, 2005, was not
signed until April 22, 2005. However, documentation attached to invoices shows that work
was being performed without an executed contract from January 1, 2005 to April 21, 2005.
See above query.
4. Contract copy in DEM program file is incomplete.
• The copy of Contract No. 000301 in DEM files is incomplete as to Page 2. Possible issues of
legality and enforceability may arise, if the contract is, in fact, incomplete, or a complete copy
of the contract cannot be located.
5. DEM estimates of County waste streams and required budgets for diversion are inaccurate.
• Supplemental contracts were issued due to the inaccuracy of DEM's initial estimates of
volumes to be processed.
6. Guidance on disclosure documentation and reporting requirements relating to "conflict of
interest" and "related parties" is insufficient.
• The "sale" of commodities by a contractor to a "related party" end -user increases the risk of
contractor abuse or fraud, particularly when combined with the lack of verifiable
documentation of incoming volumes and sources of commodities.
7. Diversion Grant Program Guidelines do not include sufficient operational controls and
reporting procedures.
• Grant Guidelines require documentation as to "source" of collected and diverted materials,
but do not require "weights by source ". Therefore, documentation provided by contractors is
inconsistent and cannot be reconciled.
• BSH documents only weights of collections from transfer station sources.
• Atlas Recycling does not provide weights by source, and its only documentation as to
"source" is typically a handwritten note on the Diversion Grant Claim Form.
8. Diversion Program Grant Guidelines do not include requirements for standardized scale
ticket data.
• Scale weight tickets reviewed did not routinely include tare weights of trucks. Some tickets
included only gross weights of trucks and loads. How tonnage of commodities was
determined using only gross weights on scale tickets without an established standard tare
weight for each vehicle is unclear.
• Scale tickets included handwritten tare weights that could not be verified. How tonnage of
commodities was verified using handwritten tare weights is unclear.
23
Chapter 3 DIVERSION GRANT PROGRAM
Scale weight tickets containing mathematical errors were identified by DEM, and appropriate
adjustments were made to contractor claim reports. However, because of problems with
vehicle tare weights cited above, verification of weights noted on scale tickets was not always
possible.
Recommendations
1. We recommend that the County obtain a legal opinion regarding the award of grants and
grant contracts by County agencies and the applicability of HRS §103D- 102(b)(2)(A),
Hawaii County Code chapter 2, article 25, and other statutory, code, and charter
provisions. Policies should be updated as necessary to ensure compliance with State and
County procurement and other applicable laws.
• More specifically, the auditors would recommend a legal opinion be obtained regarding the
issuance of grant monies by County departments and agencies to non -profit and for- profit
entities since the majority of diversion grants awarded by the Department of Environmental
Management have historically been to for - profit entities.
2. We recommend that the County review the issues of "conflict of interest" and "related
party transactions" adopting any necessary revisions to the County Code in order to reduce
the risk of abuse and/or fraud or perception of impropriety by the public.
3. We recommend that DEM establish a standardized policy pertaining to program file
documentation, including:
• Documentation of all communications, including, but not limited to, letters, e- mails, notes,
and /or documents received and generated by the department regarding all actions taken to
resolve any violations and/or discrepancies that may occur during a contract period.
• Documentation of the review and reconciliation of the contractor claims reports including, for
example, a checklist indicating that scale tickets were reviewed for errors, totaled and
reconciled as to tonnage invoiced, and that any deviation from contract requirements was duly
authorized.
• Documentation and reporting of vendor performance.
4. We recommend that DEM ensure the timely procurement of its contracts so that a valid
contract is issued prior to commencement of work. A spreadsheet or other type of tracking
system needs to be utilized to assist in monitoring of timelines for procurement and contract
related tasks.
5. We recommend that DEM review all contracts to ensure the accuracy and completeness of
each contract. There should be no sections left incomplete within any contract. Every
effort must be made to ensure that each contract is complete before execution and that
program files contain at least one copy of the contract in its entirety.
24
Chapter 3 DIVERSION GRANT PROGRAM
6. We recommend that the County and DEM consider whether a dedicated personnel position
is warranted to be tasked with the responsibility to:
• Ensure that the procurement process is begun and completed in a timely manner.
• Research industry best practices, establish benchmarks, and design program requirements and
controls.
• Ensure that all procurements are made in accordance with State and County procurement
codes.
• Ensure that procurement documents (RFPs, IFBs, etc.) and contracts contain sufficient
controls and protections.
• Update the department and its contractors as to applicable federal, State, and County
permitting and regulatory requirements.
• Monitor and report on contractor performance and compliance with contractual and regulatory
requirements on an ongoing basis.
7. We recommend that DEM review current contracted operations to identify areas of control
deficiencies that increase the risk of contractor abuse and/or fraud, and implement
corrective measures to ensure accuracy of claims and fiscally responsible use of grant
monies.
• Grant Guidelines and contracts should be revised to standardize the minimum information
requirements for vehicle identification, tare weights, and scale tickets, and require the
weighing of trucks before and after hauling of any commodity to ensure adequate weight
verification.
• The department should investigate mechanisms for accurate ongoing measurement of waste
stream volumes to provide for:
o Independent verification of current diversion claims.
• Ability to more accurately assess waste stream volumes to be processed for future
diversion contracts.
• Better data for benchmarking, long -term planning, and public education.
25
Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM
ADF — GLASS CONTAINER RECOVERY PROGRAM
Statutory Authori
Act 201, Session Laws of Hawaii 1994, currently codified as Hawaii Revised Statutes (HRS)
Sections 342G -81 through 342G -87, established provisions for Glass Container Recovery.
HRS §342G -82 provides that every glass container importer pay an Advance Disposal Fee (ADF) to
the State Department of Health (DOH). The fee is to be imposed only once on the same glass
container, excluding drinking glasses, cups, bowls, plates, ashtrays, and similar tempered glass
containers. Beginning September 1, 1994, the fee was one and one -half cents per glass container, and
beginning October 1, 2004, the fee only applies to glass containers that are not "glass deposit
beverage containers ".
HRS §342G -84 provides that ADF revenues be deposited into a special account in the State's
environmental management special fund, and be used to fund county glass recovery programs
provided that a formally adopted county integrated solid waste management plan had been submitted
for DOH review. ADF revenues are to be distributed to each county proportionate with the amount of
glass it imported based on de facto population, and DOH can utilize no more than 10 percent of
aggregate revenues per annum for administrative and education purposes and promotion of glass
recovery, recycling and reuse through research and demonstration projects.
HRS §342G -85 provides that all glass container importers submit documentation that identifies the
number of glass deposit beverage and glass non- deposit beverage containers manufactured in or
imported into the State, and sold or distributed by a manufacturer or distributor, during the calendar
year. It provides that until September 30, 2004, containers designed to hold no more than two and
one -half fluid ounces were exempt from ADF, a glass container importer who imported fewer than
5,000 glass containers within a one -year period was also exempt from ADF, and an importer who
imported 5,000 to 100,000 glass containers was permitted to submit its report and ADF payment
annually rather than quarterly.
HRS §342G -86 provides that all county glass recovery programs shall include: 1) some form of glass
incentive or "buy- back" program to encourage participation by public or private collectors; and 2)
paving of the equivalent of one mile of two -lane asphalt roadway utilizing glassphalt or glass (or, in
the alternative, any other research and demonstration project approved by DOH).
26
Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM
Audit Narrative
Reuse
In discussions with Department of Environmental Management (DEM) personnel, Recycling
Coordinator Eileen O'Hora -Weir indicated that none of the counties has met the above -cited paving
requirement in HRS §342G -86 since its codification in 1994. She cites several reasons including the
lack of sufficient amounts of crushed glass at any one time to complete a project of this magnitude,
the lack of contractors with specialized paving equipment, the significant cost related to procurement
of said equipment, and the lack of sufficient glass to sustain future projects which would make
equipment purchase feasible. In 2003, the County used a crushed glass and concrete mixture known
as "glasscrete" to create surface pads for the Kea`au Recycle and Reuse Center. In an e-mail to DEM
Director Barbara Bell dated March 13, 2003, DOH Recycling Coordinator Gretchen Ammerman
stated:
"Not only is glasscrete okay, but in the bill that became Act 176, we expanded the
allowable demonstration projects to more than just glassphalt, so there is a lot of
flexibility there ".
Subsequently, DEM requested on November 8, 2005, and received on December 13, 2005, DOH
approval to expand glasscrete pads at the Kea`au facility in fiscal year 2005 -2006. In the audit team's
follow up discussions with DOH, Solid Waste Planner Lane Otsu confirms that DOH has not been
enforcing the paving requirement in HRS §342G -86 and has been permitting substitute projects, but
is unsure of the background or reasons for those agency decisions.
The audit team contacted two Hawaii paving contractors as well as the California Department of
Transportation (Cal Trans) to inquire about the use of glass in aggregate for paving. The Hawaii
contractors indicated that paving costs would be excessive due to the additional time and labor
required to mix crushed glass with base course. Cal Trans indicated that it had never used the mixture
and did not know of studies on engineering requirements and applications for glassphalt.
HRS §342G -86 also requires that the County ADF program include some form of buy -back incentive
to encourage participation by the public and private contractors. In line with the State requirement,
the County's ADF program contracts require that processors provide a buy -back incentive to
recyclers to promote glass recycling. However, State statutes and County grant guidelines do not
specify the dollar amount of the incentive or whether the incentive must be paid on all glass
containers.
Each year DEM issues "Glass Recycling Program Guidelines" (.ADF Guidelines) which outline the
purpose, funding levels, eligibility requirements, evaluation criteria, application and operational
requirements relating to the program for the fiscal year. Some highlights of the guidelines were:
• For fiscal years 2003 -2004 and 2004 -2005
o A provision to "develop programs, which actively sponsor public education, increase
participation in glass recycling and promote awareness of glass recovery re -use. The
program shall incorporate public service announcements, flyer distribution, proper
27
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
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
Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM
Contract File Documentation
Table 1.1
ADF
Atlas Recycling
Contract Activity Summary
Fiscal Years 2003 -2004 and 2004 -2005
Contract
Contract
Contract Contract Contracted Maximum
Number Date Period Ratellb. Dollars
Fiscal Year 2003 -2004
Jul - Dec
4063 9/2312003 '03
Jan —
4120 2/19/2004 Jun'04
Total 2003 -2004
Fiscal Year 2004 -2005
Jul - Dec
000140 9114/2004 '04
Jan —
000318 4/22/2005 Jun '05
Total 2004 -2005
Contract Lbs. lbs.
Maximum Reported lbs. Carried Dollars
Pounds Sold Paid Over Paid
14,140 $ 72,750
1011b. $72,750 727,500 706,280 727,500
71,340 $ 73,750
1011b, 73,750 737,500 794,700 737,500
1,465,000 1,500,980 1,465,000 85,480 $146,500
$146,500
$ 73,250
.0811b. 73,250 915625 915140 915625 70855
$ 32,481
.0611b. 73,250 915625 ' 335160 406015 0
1,831,250 1,250r300 1,321,640 70,855 $105,731
$146,500
DEM advised that Contract No. 000318 was subsequently reduced to $53,250, Ora maximum of 665,625 pounds, although no documentation for
the reduction was found in DEM program files. However, since the contractor processed less than 665,625 pounds, the reduction does not
create an issue relating to pounds processed or payments made.
Note - Difference between pounds reported sold and pounds paid, represents adjustments made for prior period carryovers, maximum processing
limitations and mathematical errors.
Auditors reviewed a sampling of receipts for buy -back incentives paid during the audit period. Atlas
pays a buy -back incentive of two cents per pound for loads exceeding 200 pounds, and therefore,
appears to be in compliance with statutory buy -back incentive requirements.
All glass processed by Atlas during the audit period was sold to a private ranch in West Hawaii for
use as roadway base course. DEM requires that the contractor weigh all loads of glass at a certified
weight scale prior to delivery, and that weight tickets, buyer verifications, and photographs
accompany requests for payment. DEM reviews scale tickets for accuracy using a standard tare
weight for each vehicle, and reconciles the total of all scale tickets with contractor invoices and end -
user verifications. This process appears to have been consistently followed during the audit period.
However, additional controls for verification of end -user deliveries should be considered to reduce
the risk of stockpiling and reweighing processed glass. Currently, the County requires submission of
photographs of processed glass deposited at an end -user site, but such photographs do not constitute
adequate control since the end -user normally accepts multiple loads making identification of specific
loads difficult.
When auditors inquired about the contractual requirement for development of programs to promote
public participation and education, Ms. Allen indicated that while Atlas does not have flyers,
30
Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM
announcements, and other promotional materials specific to ADF glass, it does educate the public
through community projects and promotions for the HI5 program. However, auditors were not
provided documentation to confirm that this requirement had been satisfied during the audit period.
Business Services Hawaii
Site Visit
Auditors requested to meet with Business Services Hawaii at one of its processing locations in order
to observe its ADF processes. However, BSH declined the audit team's request. The following
excerpts are from correspondence received from BSH's attorney in response to the auditors' request:
"My client is unable to accommodate your untimely demand to enter her business
premises. Current operations are substantially different from those of prior fiscal
years. The contract does give your office the right to audit my client's records, which
my client has always maintained she is willing to do. My client's position is that if the
County intended to reserve the authority to enter a person's place of business without
sufficient notice or reason, it would have expressly stated that in the terms and
conditions of the contract. As far as my client is concerned, the language in the
contract was meant to authorize the County to do a records audit not a site
investigation."
DEM Grant Guidelines for BSH's Advanced Disposal Fee (ADF) contract contain the following
clause which is incorporated into its contract by reference:
"Audits: 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."
31
Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM
Contract File Documentation
Table 1.2
ADF
Business Services Hawaii
Contract Activity Summary
Fiscal Years 2003.2004 and 2004 -2005
Contract Contract
Number Date
Fiscal Year 2003.2004
4062 9123/2003
4122 2/19/2004
Total 2003 -2004
Contract Contract lbs.
Contract
Maximum Maximum Reported
Period Ratellb. Dollars Pounds Sold
Jul - Dec
'03 .1011b. $72,750 727,500 791,520
Jan - Jun
'04 .1011b. 84,500 845,000 872180
1,572,500 1,663,700
$157,250
Fiscal Year 2004.2005
Jul - Dec 73,250
000142 9/14/2004
'04 - 0811b.
Jan - Jun 73,250
000300 3/24/2005
105 .081115.
Total 2004 -2005
$146,500
lbs.
lbs. Carried Dollars
Paid Over Paid
618,096 $ 61,810
27,180
845,000 84,500
1,453,096 27,180
146,310
915625 884,360 "` 644,400 0 $ 67,552
915625 2,185,860 " "" 368,380 0 29,470
1,831,250 3,070,220 1,212,780
$ 97,022
DEM advised that Contract No. 000300 was subsequently reduced to $53,250, or a maximum of 665,625 pounds, although no documentation
for the reduction was found in DEM program files. However, since the contractor processed less than 665,625 pounds, the reduction does not
create an issue relating to pounds processed or payments made.
** The difference of 173,424 pounds between "Reported Pounds Sold" and "Pounds Paid" represents pounds reported by the contractor as
collected from the KRRClEPA Phase I project. The KKRC collections were paid under the contract for that project and were not eligible for
payment under the ADF program.
The difference between "Reported Pounds Sold" and "Pounds Paid" of 39,960 pounds for Contract No. 000142 and 1,817,480 pounds for
Contract No. 000300 represents the weight reported by the contractor as having been collected for the Kealakehe Transfer Station
Enhancement Project and the HIS Beverage Container Deposit Program, minus the 27,180 pounds carried over from fiscal year 2003 -2004 and
paid in fiscal year 2004 -2005. The collections reported for Kealakehe and HIS were paid under contracts for those programs and were not
eligible for payment under the ADF program.
Auditors noted that 27,180 pounds in excess of the contract maximum for fiscal year 2003 -2004 was
to have been carried over to the billing period for July to September 2004, but was overlooked and
ultimately paid in the billing period for April to June 2005.
BSH's quarterly claims include spreadsheets that show monthly ADF weights collected by transfer
station site. The spreadsheets include a footnote indicating collections from commercial accounts and
certain other sites are not weighed upon collection, and not included in the spreadsheet calculations.
However, these collections are subsequently cited to explain why weights claimed as collected are
significantly less than weights claimed as crushed and sold. Auditors noted that the difference
between those weights is significant, reaching as much as 103,852.07 pounds in one three -month
period. DEM's internal (recap of scale tickets submitted for crushed glass delivered to end market
users for each billing period includes the following notation for this contractor: "Note: Glass Claim
significantly exceeds collection."
32
Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM
Because BSH does not weigh all incoming ADF glass, it utilizes the following method to calculate
processed weights billed to the County: Weight scale receipts for end market deliveries, including all
crushed HI5 glass and ADF glass, is reduced by the sum of all weight scale tickets for incoming H15
glass from the ARC of Hilo (ARC), with the remaining weight being considered as ADF glass. If
sufficient controls were in place, this should be an acceptable method of calculation. However, the
County of Hawaii, Legislative Auditor's Limited Scope Performance Review — Glass Recycling and
Diversion Program dated December 24, 1998, raised concerns specifically relating to "stockpiling of
processed glass and the possibility of reusing stockpiled glass for purposes of reimbursement" by
then contractor Recycle Services Hawaii (RSH), whose principal owner is now principal owner of
BSH. This concern, combined with records indicating that BSH's 2004 and 2005 claims include
deliveries to an end -user who is also a BSH officer, do not provide reasonable assurance that
processed glass is claimed only once for payment under the ADF program. The County's current
requirement for photographs of processed glass deposited at an end -user site does not constitute an
adequate control, since the possibility of stockpiled materials being reloaded and reweighed for
purposes of reimbursement as cited in the 1998 audit report remains unresolved, and additional
control measures should be implemented.
DEM program files also included BSH spreadsheets recapping ADF tonnage collected, processed,
and sold for the second half of fiscal year 2004 -2005, indicating 1,108,360 pounds of HI5 redemption
glass sold during May and June 2005. However, BSH's involvement with H15 redemption glass is
limited to its role as subcontractor to ARC. According to DOH Environmental Health Specialist Peter
Bloom, BSH is prohibited from filing claims for DOH reimbursement under the HI5 program since
BSH facilities are not "certified redemption centers ". Therefore, BSH has two options relating to HI5
glass containers: 1) it can separate containers and redeem them at a "certified redemption center"
receiving five cents per container, or 2) it can process containers with other ADF glass at eight cents
per pound under its County contract. Mr. Bloom advised that BSH stated it does the latter due to
labor costs to separate containers and danger to workers of broken glass during the separation
process.
BSH's claims for the period January to June 2005 indicate total glass pulverized and delivered to end
market users of 2,185,860 pounds, reduced by 184,000 pounds of ADF glass collected from the
Kealakehe Transfer Station and exempted from the ADF program, further reduced by 1,660,660
pounds in HI5 redemption glass collections for ARC, leaving a total of 341,200 pounds claimed for
payment under the ADF program. ADF documentation shows that all 2,185,860 pounds were
delivered to end market users between January and June of 2005. However, in response to auditors'
request for confirmation of end market use, ARC provided reports in March 2006 indicating that
BSH collected 1,849,800 pounds of H15 redemption glass from ARC during the period January to
June 2005, but did not sell or deliver glass to end market users until the period September to
December of 2005.
DEM program files also contained no documentation of BSH compliance with the buy -back incentive
or public education program requirements in its ADF contracts, except for contractor notations on
Diversion Program Claim Forms attesting that incentives had been paid and public program
requirements were met. .
Program Continuation Concerns
33
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
Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM
Findings
1. Exemption of diversion program contracts from State and County procurement codes is
unclear.
• Insufficient documentation is available in program files to determine whether or confirm that
the ADF program is exempt from the State procurement code under HRS
§ 103D- 102(b)(2)(A).
• Insufficient documentation is available in program files to determine whether monies for the
"Glass Recycling Program" contained in the DEM budget adopted by ordinance constitutes
legal authorization for the issuance of grants for this program under the County Code and
their exemption from procurement rules.
2. The disparity in diversion payments between ADF and HI5 glass recycling programs
creates incentive for contractors to shift processed ADF glass to the HI5 program in the
absence of adequate monitoring mechanisms.
• Though ultimate responsibility for oversight of the ADF and H15 programs rests with the
State, DOH has failed to implement necessary control measures.
• There is a high probability that ADF glass was included in the HI5 weights claimed for the
period January to June 2005.
• Because data as to the number of containers imported /manufactured by material size and type
is only maintained on a State level it, does not provide for independent corroboration of
County ADF program claims.
3. At the County level, the absence of adequate control measures does not permit independent
corroboration of vendor claims for ADF glass collected, processed, and sold and vendor
claims of compliance with its contractual obligations to the recycling public.
• Not all source streams are weighed or identified by material type.
• Not all ADF collection receptacles are clearly marked.
• Insufficient controls are in place to prevent cancelled glass from being claimed more than
once.
• Unsigned end -user receipts were observed in ADF contract files.
• No documentation of ADF promotion and education and required buy -back payments to the
recycling public was observed in ADF contract files.
35
Chapter 3 ADF -- GLASS CONTAINER RECOVERY PROGRAM
4. The auditors were unable to complete the procedures delineated in the audit program for
one contractor due to the contractors interpretation that the County's right to "audit" is
limited. To an off -site records review.
5. Glass Recycling Program Guidelines and recycling contracts do not set forth sufficient
control measures to reduce the risk of contractor fraud and/or abuse and ensure the
accuracy and validity of contractor's claims.
• There is insufficient clarification in Grant Guidelines and individual contracts of minimum
control procedures and informational requirements for vehicle identification, standard tare
weights, scale house tickets, and end -user verification.
6. While generally accurate, DEM's financial tracking of contracts is inefficient in the
following respects:
• Payments owed to contractors for excess poundage were not timely carried over to subsequent
billing periods.
• While contract amounts for the period January to June 2005 were reduced by $20,000, the
program file contained no documentation of the reduction, related authorizations, or
notification of the affected contractors.
• Contract status and financial budget and expenditure tracking information are not reported to
the designated budget responsible manager within the department.
• Tracking is done outside of the County's FRESH accounting system and does not readily
allow for reconciliation of contract invoices and payments. However, invoices were properly
initialed for payment without exception by authorized DEM personnel.
7. DEM is not timely in its initiation of procurements or its execution of contracts.
• Purchasing Agent Bill Gray, who was responsible for DEM procurements during the audit
period, indicated chronic lateness by the department in initiating and completing procurement
related tasks, further opining that the delays were due in part to:
• Inadequate support staff.
• Complexity of contracts, procurement laws, and underlying regulations.
8. Although the State has not enforced the specific "glassphalt" paving requirement under
HRS §342G -86, DEM has completed a "glasscrete" project approved by DOH.
• It appears that the statutory "glassphalt" paving requirement is unrealistic. HRS §103D-
407 (b) states:
"All highway and road construction and improvement projects funded by
State or a county or roadways that are to be accepted by the State or a county
as public roads shall utilize a minimum of ten percent crushed glass aggregate
Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM
as specified by the department of transportation in all basecourse (treated or
untreated) and subbase when the glass is available to the quarry or contractor
at a price no greater than that of the equivalent aggregate ". [emphasis
added]
Currently, the- insufficient supply of crushed glass and high labor costs associated with
preparation of the glassphalt mixture make the paving requirement cost prohibitive. The
ample supply and lesser cost of aggregate also deter development of this market.
9. Significant reduction in State funding of the ADF Program will negatively impact County
glass recycling efforts.
• The County will have to either fund or discontinue its ADF program.
Reduced funding or discontinuation of the program will provide further incentive for glass
processors to claim ADF glass under the H15 program.
• Reduced funding or discontinuation of the program may cause glass processors to refuse to
accept ADF glass, resulting in its disposal in landfill or illegal waste dump sites.
Recommendations
1. We recommend that the County obtain a legal opinion as to whether the ADF and Diversion
Grant programs are, in fact, exempt from the State procurement code under HRS §103D-
102(b)(2)(A).
2. We recommend that the County amend its Code to clearly establish its authority to audit
any entity with which it contracts, regardless of whether the procurement is subject to or
exempted from State and County procurement code provisions.
Language should include clarification that an audit entails more than a review of documents
and records. For example, it may include, but should not be limited to, inspection of
contractor premises, processes, controls, and records. Consideration should be given to
language contained in 1lAR §3- 122 -166 and §3- 122 -167.
The County needs to review and develop rules and conditions applicable to procurements
exempted from State and County procurement codes, and address possible gaps in remedies
and protections normally afforded under the "General Rules and Conditions" of the codes.
3. We recommend that the County incorporate into all contracts exempted from State and
County procurement codes, excerpts from the "General Terms and Conditions" of said
codes which afford the County better protections and remedies against collusion, abuse, and
fraud without subverting the flexibility intended by the exemptions. For example, Section 4,
"Performance of Contract," contains language that permits the procurement officer or purchasing
37
Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM
agency to reserve its right to suspend a contractor from bidding on any or all County contracts
with due cause.
4. We recommend that DEM revise Grant Guidelines and subsequent monitoring practices to
ensure accuracy of contractor claims and to reduce the risk of errors, abuse and/or fraud.
• Require that all contractor reports of diverted source streams be quantifiable and verifiable.
• Include specific language delineating the County's right to audit contractor records and
operations and to conduct random inspections of contractor operations for the purpose of
verifying claims and delivery to end markets.
• Include specific language addressing related party transactions, defining who qualifies as a
"related parry ", requiring related party disclosures, and delineating additional documentation
and control procedures required for related party transactions, contracts, and subcontracts.
• Require submittal of a process flow plan for each recycling facility, including measurement
procedures for inflow sources, segregation of non - program eligible materials, and verification
of end market user deliveries.
• Clarify that contractor documentation of its buy -back incentive payments to the recycling
public will be required, specifying acceptable documentation such as signed receipts.
• Clarify that contractor documentation of its program development efforts will be required,
specifying acceptable documentation such as newspaper ads, educational literature
distributed, and testimonial letters from participating community groups.
Monitor and enforce grant and contract requirements.
o DEM needs to develop a comprehensive monitoring and control plan for all programs. If
sufficient controls are "built in" at the IFB, RFP, grant guideline, and contract phases, the
burden of operational oversight, monitoring and inspection can be reduced. This is not to
say that additional personnel may not be required to implement the necessary oversight
and monitoring procedures.
5. We recommend that DEM review its ADF program for glass source streams that are not
currently being measured, and implement corrective actions to provide greater
accountability without causing undue hardship to contractors or County personnel in their
application.
6. We recommend that DEM determine whether additional positions will be required to meet
timelines for procurement and contract issuance and to conduct necessary oversight and
monitoring of contractor performance under procurement and contract agreements.
7. We recommend that DEM research utilizing the project accounting module of the County's
FRESH accounting system to assist in more efficient financial monitoring and reporting.
38
Chapter 3 ADF — GLASS CONTAINER RECOVERY PROGRAM
S. We recommend that DEM develop a formal policy and procedure for authorization,
documentation, and systematic recordation of changes to its contracts and budgets.
9. We recommend that DEM establish a formal policy and procedure whereby financial status
reports at contract and program levels are regularly and timely provided to and monitored
by a designated budget responsible manager within the department.
10. We recommend that DEM obtain specific written clarification from DOH as to whether its
"glasscrete" projects will satisfy all or portions of the "glassphalt" paving requirement
under HRS §342G$6(a)(2).
11. We recommend that DEM work closely with DOH and other counties to address data
deficiencies and possible solutions such as, reporting of ADF glass imported or
manufactured at both the county and State levels.
• DEM should implement the necessary procedhres to obtain accurate estimates of volumes to
be processed.
12. We recommend that DEM to further research the history of ADF accounting within the
State Environmental Management Special Fund and inquire:
• How were annual allocations to the counties calculated?
How and why was a surplus accumulated if counties needed to supplement ADF programs
with their own funds?
+ Why were surplus funds transferred to the General Fund when ADF funds were insufficient to
cover ongoing glass recovery?
13. We recommend that the department and the County address issues created by the severe
reduction or possible discontinuation of State funding for the ADF program.
91 Z
Chapter 3 IIIS - BEVERAGE CONTAINER DEPOSIT PROGRAM
HI5 - BEVERAGE CONTAINER DEPOSIT PROGRAM
Statutory Authori
The State Legislature passed Act 176 in 2002 and Act 241 in 2004, codified as Hawaii Revised
Statutes (HRS) Chapter 342G, Part VIII, providing for a "Beverage Container Deposit Program" to
be administered by the Department of Health (DOH), Solid and Hazardous Waste Branch.
HRS Chapter 342G, Part VIII, requires that all Hawaii deposit beverage distributors register with
DOH, maintain records on the manufacture, import and export of deposit beverage containers, and
pay both a per container fee and deposit. It establishes a "Deposit Beverage Container Deposit
Special Fund" and requires that all program revenues be deposited into said special fund. Monies in
the special fund are to be used to reimburse refund values and pay handling fees to redemption
centers, fund administrative costs, public education, and recycling market promotion, and subsidize
handling and transport of containers to end markets as well as oversight personnel costs. Specifically,
distributors are required to report the number of deposit beverage containers, by container size and
type, manufactured in, exported from and imported into the State. A container fee is to be assessed
for each deposit beverage container imported into and manufactured in the State (less exports).
Pursuant to HRS §342G -110, the Beverage Container Deposit Program was implemented on
January 1, 2005, requiring that every deposit beverage container sold in the State have a refund value
of five cents, with the refund value clearly indicated on each container. Distributors who manufacture
or import deposit beverage containers must pay the five cent per container deposit into the special
fund, and can recoup the deposit by charging the dealer, who in turn charges the consumer, who in
turn may redeem each clean, empty container for a full five cent refund. Redemption centers must be
certified by DOH prior to operation. Once certified, a redemption center must verify and accept all
valid "Hawai`i Beverage Deposit Containers ", pay the redeemer the full refund value, ensure that
each container collected is recycled, and forward the necessary documentation to DOH to support
claims for payment. Documentation must include number or weight of containers of each material
type accepted and amount of refunds paid, and number or weight of containers of each material type
recycled and out -of -state transport and weight or acceptance receipts from permitted recycling
facilities.
HRS §342G -113 requires that dealers (retailers of deposit beverage containers) operate redemption
centers by July 1, 2005, unless exempted from requirement under HRS §342G- 113(b). HRS §342G-
113(d) provides: "If there is no redemption center within the two -mile radius of a dealer due to the
criteria described in subsection (b), then the respective county and the State shall determine the need
for a redemption center in that area. If a redemption center is deemed necessary, then the State, with
assistance from the county, shall establish the redemption center with funding from the deposit
beverage container deposit special fund."
Hawaii Administrative Rules (HAR) Title 11, Chapter 282 sets forth rules and requirements for State
and county governments, distributors, dealers, redemption centers, and recycling facilities relating to
the Deposit Beverage Container Program. HAR §11- 282 -62(a) also provides: "If there is no
redemption center within two miles of a dealer due to the criteria described in section 11- 282 -31, then
40
Chapter 3 HI5 - BEVERAGE CONTAINER DEPOSIT PROGRAM
the respective county shall determine the need for a redemption center in that area. If a redemption
center is deemed necessary, then the county, with the assistance of the State, may establish the
redemption center with funding from the deposit beverage container deposit special fund."
Program Backaround
Although lead time for statutory implementation of the Beverage Container Deposit Program was
over two years, DOH apparently had neither established necessary internal procedures or controls nor
developed or communicated standardized operational procedures to the counties and their "certified
redemption center" operators. The State Auditor's management audit of the Deposit Beverage
Container Program for fiscal year 2004 -2005 stated, in pertinent part:
"...despite more than a two year lead time to prepare for consumer redemptions of
beverage container deposits, the Department of Health was not ready to properly and
efficiently return consumers' deposits... the department lacks an auditable financial
accounting system and cannot ensure that all revenues and payments are properly
accounted for... From January to June 2005, the first six months of the program, the
department has paid over $10 million to redemption centers — approximately $8
million for reimbursements and $2 million for handling fees. These payments are
being made based on numbers submitted by the redemption centers and are not
verified by the department because it has not developed procedures to do so.
Potentially the department could be paying for nonexistent and unlabeled containers."
To facilitate the establishment and monitoring of certified redemption centers in Hawaii County,
DOH and the County entered into a "Memorandum of Agreement" dated July 1, 2004, in the amount
of $250,000. The procurement of a certified redemption center operator was deemed exempt from
provisions of the State procurement code under HRS §10313- 102(b)(2)(A), and County procurement
provisions under Hawaii County Code §2 -141 for award of non - county funds and co- sponsored
activities. While there are two entities in the County operating "certified redemption centers ", only
one County "Grant/Contract" was issued for the period January to June 2005. Contract No. 000180,
in the amount of $150,000, was issued to The Arc of Hilo (ARC) for establishment of eight
redemption center sites. Seven of the redemption centers are operated at County transfer stations,
with the eighth located at the Kamaili Charter School in Pahoa. DOH "permits by rule" were
obtained for all eight sites, jointly issued to the County of Hawaii and ARC, and are valid through
December 29, 2009. Only three of these permits were obtained prior to the January 1, 2005 start date
required by DEM Grant Guidelines. However, all eight permits were obtained by February 2005.
Department of Environmental Management (DEM) Grant Guidelines for fiscal year 2004 -2005
pertaining to redemption centers further require that, prior to grant award, the applicant must have a
detailed plan to account for all materials handled including screening criteria for incoming loads and
procedures for weighing materials. The guidelines also call for monthly reports to be submitted
within 30 days of the end of each month, including the following information:
• Number of containers collected and redeemed by commodity (material type).
• Total pounds collected of each commodity.
41
Chapter 3 HI5 - BEVERAGE CONTAINER DEPOSIT PROGRAM
• Estimated number of containers by type of beverage (juice, water, etc.).
• Source of redeemed containers, and evidence that all redeemed material was cancelled and
that all cancelled material had been recycled.
• Description and quantification of contamination issues, including number and weight of
ineligible containers received.
• Total number of transactions processed.
• Narrative of problems encountered or concerns raised by the public.
• Description of all public education/outreach activities conducted.
In reviewing DEM program files, auditors noted that ARC's monthly reports of weights collected did
not reconcile with DOH reports. In its letter to DEM dated August 8, 2005, ARC attributed this
discrepancy to timing differences between ARC and DOH reporting periods. Although ARC
reporting is generally good, no documentation (inclusive of authorized signatures) was found to
fulfill the grant requirement of evidence that redeemed material had been cancelled and that cancelled
material had been recycled to a recycle or reuse market. This documentation was requested by
auditors in January 2006, and was subsequently received on March 1, 2006. However, while
documentation supports cancellation and recycling of collected weights reported by ARC, it does not
reconcile with cancelled and recycled weights reported by subcontractor Business Services Hawaii
(BSH). This creates some concern as BSH participates in other County grant programs for the
collection of similar commodities from other sources such as the ADF glass program, the Kealakehe
transfer station project, and the County's diversion grant program.
The audit team was unable to sufficiently address its concerns of possible commingling and/or double
counting of commodities through observation of operations, since BSH declined to cooperate with
auditors' request to visit contractor facilities. The contract with ARC does not, in fact, address
subcontractors with respect to the County's audit authority. However, DEM Grant Guidelines for
BSH's Advanced Disposal Fee (ADF) contract contain the following clause which is incorporated
into its contract by reference: "Audits: 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."
On February 24, 2006, auditors met with ARC personnel including Chief Financial Officer Debbie
Perkins, Chief Administrative Officer Debra Cabarloc, and Redemption Coordinator Ken Cordrey.
All personnel were very knowledgeable about regulatory requirements, program operations, and
internal controls as well as the subject Contract No. 000180. They demonstrated current program
flows at site operations in their monthly reports to DOH and the County. They also demonstrated
procedures for recordkeeping, internal controls, and data verifications and reconciliations. They
indicated that when the HI5 program was implemented, the State had not developed or provided
process or procedural guidance and had instructed that only end data would be required. They further
indicated that DEM's "Recycle and Diversion" personnel were extremely helpful in developing
processes, procedures, and solutions to the multitude of problems encountered in the early months of
the program. They also discussed inefficiencies caused by the lack of electricity at redemption sites
requiring manual entry of daily operations data for accounting and analysis purposes, subsequent
improvements implemented as a result of operating experience, and plans for continued
improvement. It was apparent from information presented that managerial oversight, review, and
control by ARC are constant and rigorous.
42
Chapter 3 HI5 - BEVERAGE CONTAINER DEPOSIT PROGRAM
ARC personnel also indicated that five of the nine current redemption sites have been scaled back to
weekend operations because of difficulty in recruiting manpower especially in West Hawaii, and not
for a lack of public participation. Some West Hawaii sites are currently manned by employees who
commute from East Hawaii. However, major problems have been worked out and programs are
running more smoothly, with ARC pursuing more public education and participation projects
including coordination with other non - profit and community groups on collection drives. ARC
management indicated that it is currently working on reconciling documents supplied by its
contracted "recycling facility" in response to documentation deficiencies noted by auditors and
discussed with DEM Recycling Coordinator O'Hora -Weir in January 2006.
Findinss
1. DOH's failure to properly prepare for, implement, and monitor the County's Beverage
Container Deposit Program:
• Caused confusion and frustration for the County, its redemption center operators, and the
general public.
• Did not allow for validation of collection and cancellation data due to a lack of data reporting
systems.
Increased the risk of data reporting abuse.
2. In spite of obstacles encountered, ARC appears committed to the success of the County's
Beverage Container Deposit Program, and to that end, has been diligently working to
continually improve all aspects of the program.
3. Several rural communities with an elderly demographic continue to be unserved or under -
served due to their distance from a certified redemption center particularly along the
Hamakua Coast.
4. DEM was unaware of the requirement that ARC provide cancellation and end - market
recycle/reuse documentation mandated under DEM's own program grant guidelines.
5. Collection data and subsequent cancellation/recycling data do not reconcile.
6. Inconsistencies were noted in the Certificates of Insurance submitted by contractors.
In reviewing the Certificates of Insurance submitted by the various contractors relating to
several of the recycling and diversion programs, the auditors noted that in several instances
the named "additional insured" specified County departments other than the Department of
Environmental Management.
o In this case, "County of Hawaii, Department of Finance" rather than the "County of
Hawaii, Department of Environmental Management" was listed as the additional insured.
43
Chapter 3 HI5 - BEVERAGE CONTAINER DEPOSIT PROGRAM
7. Policy coverage terms shown on Certificates of Insurance did not extend for the entire
contract period.
Recommendations
1. We recommend that DEM work with DOH to establish certified redemption centers in
those areas currently unnerved or under - served as required by HRS §342G113(d) and/or
HAR §11- 282-62(a).
2. We recommend that DEM work with other counties and DOH to assess current program
deficiencies at all levels and to formulate countermeasures and procedures to address them.
3. We recommend that DEM work more closely with ARC to ensure that sufficient control
mechanisms are in place and that regular review and reconciliations are performed to
confirm accuracy of data collected and reduce the risk of contractor errors or abuse.
4. We recommend that DEM continue to support ARC's efforts to make transfer station
redemption centers and public participation projects more convenient and user- friendly.
5. We recommend that DEM prepare a master internal check list/review form to accompany
contractor payment requests. This form should be modified as needed to reflect specific
documentation and reconciliations required for a particular program or contract.
6. We recommend that the County Council clarify by ordinance the County's authority to
audit any and all of its procurement contracts including any sub -tier contracts.
Subsetluent Events
Pertaining to Finding No. 5 regarding substantiation of cancellation and end market delivery,
documentation provided by subcontractor BSH to ARC on February 27, 2006, did not reconcile with
either BSH's or ARC's H15 accounting. ARC subsequently indicated that it would continue to
research and reconcile collections data and provide information when complete. Based on data
received from ARC via DEM on April 26, 2006, the HI5 end market weights have been reconciled.
In discussions with Recycling Coordinator Eileen O'Hora -Weir on April 18, 2006, auditors were
advised that DOH had not provided the County a contract for the H15 Beverage Container Deposit
Program for 2006 -2007 fiscal year, and in turn, the County could not issue vendor contracts which
may result in a lapse of HI5 program services island -wide.
44
3 GREEN WASTE PROGRAM
GREEN WASTE PROGRAM
Statutory Authori
Hawaii Revised Statutes (FIRS) chapter 342G mandated that each county develop an "integrated
solid waste plan ", and HRS §342G -25 and §342G -26 further define plan content requirements
including source reduction, recycling, and bioconversion components which in turn stipulate
inclusion of a green waste component. Hawaii Administrative Rules §11- 58.1 -65(b) required solid
waste disposal facilities to have in place a plan to ban or require source separation of green waste
from entering the disposal facility by December 31, 1994. The plan needed to detail requirements for
diversion of 75% of all commercially generated green waste by December 31, 1995, and 50% of all
residential green waste by December 31, 1996. It further provided that if data submitted as part of
the facility's annual report indicated that diversion rates were not achieved, all commercial green
waste was to be banned from the facility by December 31, 1995, and all residential green waste by
December 31, 1996.
Audit Narrative
The County did not attain diversion of 75% of all commercially generated green waste by
December 31, 1995, and 50% of all residential green waste by December 31, 1996; and therefore, all
green waste is by statute banned from County landfills.
The County's Updated Integrated Solid Waste Management Plan calls for a ban of green waste at all
landfills by 2006.
The operations plans for the Hilo and Kona landfills in effect for the audit period were reviewed. The
Hilo plan dated March 16, 1994, Appendix C, paragraph 3.3.11, states that the County is currently
developing a plan for landfill diversion and development of a composting facility to be submitted to
the State Department of Health (DOH) by December 31, 1994. The Kona operations manual dated
September 10, 1993, does not specifically address procedures regarding green waste.
Hawaii County Code §20- 43(b)(1) states: "All acceptable household refuse, including shrubbery and
yard trimmings, deposited into the transfer station solid waste container shall be accepted by the
County for disposal on any day during normal working hours of the station. No item shall exceed
four feet in any dimension or weigh more than fifty pounds."
The aforementioned requirements are currently not in agreement. Pursuant to HAR §11- 58.1- 65(b),
all green waste should have been banned from County landfills since December 31, 1996. The
Updated ISWMP does not call for a complete ban to take effect until 2006. The Hawaii County
Code states that household green waste "shall" be accepted in transfer station solid waste containers,
and the Landfill Operations Plans do not consistently address the issue of green waste handling.
The Updated ISWMP also does not reflect the current status of green waste handling for the County.
Recycling Coordinator Eileen O'Hora -Weir advised that Kealakehe is currently operated as a small
45
Chapter 3 GREEN WASTE PROGRAM
load public and commercial drop -off site with the "main" site for West Hawaii located at the
Pu`uanahulu site, and the drop -off site for East Hawaii located near the South Hilo landfill. The
Kea`au Recycle and Reuse Center is also now set up for household green waste drop off. The
Department of Environmental Management (DEM) is preparing to implement a tipping fee for
commercial green waste generators.
Contracts
The original Request - for - Proposal (RFP) No. 5 -3603 issued July 2002 called for processing of 4,000
tons of green waste annually in two locations, Kona and Hilo. However, the subject contract was not
awarded until just one month prior to expiration of the January to June 2003 contract period.
Contract No. 3182 was finally awarded to Hawaii Metal Recycling dba Big Island Recycling (HMR).
Four supplemental contracts for processing of green waste in fiscal years 2003 -2004 and 2004 -2005
were also awarded to HMR.
Supplemental Contract No. 1 dated September 8, 2003, in the amount of $294,648, extended the
contract period from July 1, 2003 through December 31, 2003, with no change in terms. Contractor
compensation was to continue at a rate of $24,554 per month per site for minimum processing of 500
tons per month per site.
Supplemental Contract No. 2 dated April 23, 2004, extended the contract period from
January 1, 2004 through June 30, 2004, in the amount of $315,000. Some of the significant
modifications to contract terms were:
• A modified monthly processing requirement of a combined minimum of 1,400 tons of green
waste from the two locations, replacing the previous monthly minimum requirement of 500
tons from each location, or a minimum requirement of 1,500 tons if processing was conducted
from only one location during the month.
• A change in compensation from a fl at rate per site per month to $35 per ton processed.
• A requirement that processed stockpiles at the Kona public pick -up site does not exceed four
feet due to fire hazard.
• A requirement that the contractor spend a minimum of $416.66 per month for advertising.
• A requirement that signs be posted at all locations stating days and hours of operation.
• A modification stating that if processed waste at all sites is at storage capacity limits, the
contractor must notify the County within 48 hours, and if the County in turn cannot provide
an alternative storage area, the contractor may cease processing for the remainder of the
month with the minimum processing tonnage requirement being waived. The contractor was
to be compensated at the agreed upon $35 per ton processed or $49,000, whichever was
greater.
• A modification that the contractor would deliver processed green waste to any site the County
specified within a 10 -mile radius of either the Kona or Hilo processing sites at no additional
charge, with the County compensating the contractor at a rate of $60 per hour for delivery of
mulch to sites outside the 10 -mile radius. In conversations with DEM personnel, auditors
were advised that while the contract is not clear, "site" is intended to mean either a County or
a private site.
46
Chapter 3 GREEN WASTE PROGRAM
Supplemental Contract No. 3 dated October 11, 2004, extended the contract from July 1, 2004 to
June 30, 2005. The significant modifications to contract terms were:
• The allocation of an additional $1,030,000 for the 12 -month supplemental term. ($609,648
had been allocated for the previous 12 -month term.)
• Revision of the monthly processing requirement to a combined total from the Hilo and Kona
sites of a minimum of 2,000 net tons and a maximum of 2,500 net tons of processed green
waste. (The contractor submitted invoices and was paid for tonnage in excess of 2,500 tons
for five months of the contract period, but there is no documentation in DEM's program file
acknowledging or authorizing the departure from contract terms.)
• Revision of the advertising expenditure requirement to $5,000 over the term of the
supplemental agreement.
• Inclusion of a provision stating that use of water during processing should be limited only to
that necessary to control dust, since excessive use adds unnecessary weight to the finished
product.
Supplemental Contract No. 4 dated May 10, 2005, indicated the County wished to increase the
contract amount without an extension of time. The significant modifications to contract terms were:
• The allocation of an additional $165,000.
• A modification that the contractor will waive loading fees charged to parties accepting
processed mulch at both the Hilo and Kona sites from March 15 through June 30, 2005.
• An increase in the combined required monthly processing requirement to a maximum of
3,750 tons. (The supplemental contract does not specify the contract period to which this
change relates. The contractor's invoice and the County's payment exceeded 3,750 tons for
March and May of 2005.)
The County has two green waste processing facilities, one located in East Hawaii near the South
Hilo Landfill and the other located in West Hawaii near the Pu`uanabulu Landfill. The permits for
both sites were issued by DOH as joint permits with the County listed as owner and the contractor
listed as operator. The County also has sites which are permitted under "permit by rule" such as the
Kea`au transfer station facility and the old Kealakehe landfill site, where no more than 3,000 tons of
green waste per annum may be processed and stored for public pick -up.
On two occasions, HMR processed less than the minimum tonnage required, and DEM still made full
payment even though unprocessed stockpiles at both locations exceeded DOH permit maximums.
The first occurrence was in June 2004, when only 829.38 tons were processed at the Kona site. This
occurred at the end of the contract period when limited funds remained. Since the contractor had
been permitted to carry over tonnage exceeding contract maximums to future periods, and in fact
carried over 55 tons from this same period, there seems little justification for the contractor's not
having processed the minimum tonnage required. There is no documentation in the program file as to
why the minimum was not processed, nor is there any DEM discussion as to why payment was
authorized even though contract terms were not met. The second occurrence was in November 2004.
According to contract terms, HMR was to process a minimum of 2,000 tons per month, but a total of
only 1,512.66 tons was processed from the Hilo site. The invoice includes a handwritten note,
initialed L.T., stating "less than 2000 o.k." However, there is no explanation.
47
Chapter 3 GREEN WASTE PROGRAM
Recycling Coordinator O'Hora -Weir indicated that DEM was aware that the contractor was adding
excessive amounts of water to processed mulch in Kona which increased weights. This prompted the
addition of the following provision in Supplemental Contract No. 3:
IT]he use of water during processing should be limited to the extent needed to control
dust and shall not be excessive. Contractor shall ensure that the processed mulch is not
overly saturated as doing so caused the resultant product to have excessive foul odor
and adds unnecessary weight to the finished product."
However, review of the program file for subsequent periods did not demonstrate
implementation of any control procedures, nor did scale tickets indicate any reduction in load
weights.
In reviewing reported weights processed each month during the audit period and after observation
and inquiry of DEM personnel about site layouts and program processes, several areas of concern
were noted:
• For both the Hilo and Kona sites, certified scales are located some distance from the green
waste processing area.
• Incoming green waste is not weighed; therefore, unprocessed weight cannot be used as a
reconciling number to corroborate the contractor's claims of tons processed.
• The Kona site does not use a County scale house for weighing processed mulch.
• When asked what controls are in place to prevent contractors from weighing the same load of
processed mulch more than once, the Recycling Coordinator indicated that DEM does not
have sufficient staff for continual monitoring, but that visual observation of processed and
unprocessed green waste piles is conducted on an occasional basis.
• During the audit period, no County personnel were present at the green waste processing sites,
and no independent verification was documented from end -users as to tonnage processed.
• Contractor trucks delivering loads of processed waste to County storage sites and end -user
sites are only weighed full, and are not required to be re- weighed when emptied.
• No policy is in place establishing minimum information to be reported on scale tickets.
• No policy is in place to standardize vehicle tare weights.
• Information provided on scale tickets is inconsistent.
• A vehicle may be identified by driver, vehicle color, license plate, or company truck
number on one ticket and by another method on a subsequent ticket.
• A vehicle may be assigned a particular tare weight on one ticket and a different tare
weight on subsequent tickets even on the same day.
The foregoing deficiencies combine to make verification of processed tonnage difficult, if not
impossible. These deficiencies also increase the possibility of abuse and/or fraud, since it would be
possible for contractors to weigh the same load multiple times by driving to the scale house,
obtaining a weight ticket, returning to the processing site, adding a small amount of mulch or even
just water, returning to the scale house, and obtaining a new weight ticket. A letter from DEM to
HMR prior to the audit period was noted in the program file, discussing the contractor not having met
minimum processing requirements for two preceding months. Review of processed tonnage reported
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Chapter 3 GREEN WASTE PROGRAM
under Supplemental Contract No. 1 shows that tons processed barely exceeded required minimums.
Faced with the possibility of not being paid, the contractor may have been given incentive to over
report claims in the absence of proper weight verification controls.
Subsequent RFP No. 2036 was opened on June 30, 2003, and sent to DEM for review on July 7,
2003. In a letter dated August 6, 2003, DEM Director Barbara Bell responded that the review team
had further questions and anticipated completion of its evaluation by the end of August 2003. She
requested a six -month extension of the HMR contract to allow for this evaluation, the awarding of a
new contract, and time for the selected contractor to set up operations. In actuality, four supplemental
contracts were issued that extended the original contract by a full two years through June 2005, even
though DEM was aware of the contractor's practice of adding excess water increasing weights and
was dissatisfied with the contractor's performance. Recycling Coordinator O'Hora -Weir advised that
there were several factors contributing to the lengthy delay in awarding a new contract. The County
entered into negotiations with the initial contractor chosen; however, after approximately six months,
the contractor's best and final offer was significantly different from its original submission and the
RFP's intent. DEM then entered into negotiations with second place contractor EKO with a new
contract executed on June 17, 2005.
DOH Violations
The County and HMR were in violation of DOH green waste permits during the audit period in
several areas:
• DOH permits issued in 1999, and scheduled to expire on October 28, 2004, for both sites,
were issued under "permit by rule" which only apply to sites processing no more than 3,000
tons per annum. According to DEM's annual report for fiscal year 2002 -2003, tonnage
processed was just under 7,800 tons for Hilo and 6,400 tons for Kona. In a letter to DEM
dated August 10, 2004, DOH reiterated that permits were set to expire on October 28, 2004,
and that because "permits by rule" limit green waste composting facilities to less than 3,000
tons per year, new general permit applications would be required for both sites. According to
subsequent DOH communications, permit applications were filed on October 28, 2004, with
DOH issuing permit approvals on March 14, 2005. (Note: Improvement in permitting was
noted with new contractor EKO. Permit applications for EKO were submitted in June 2005
prior to contract start -up in July 2005, and DOH approvals were received in July 2005)
• Both the Hilo and Kona sites were in violation of buffer zone requirements between storage
piles and site boundaries from July 1, 2003 until March 14, 2005, when new permits issued by
DOH reduced buffer zones to 15 feet.
Both sites continued to be in violation of maximum storage capacities under the general
permits issued on March 14, 2005. DOH acknowledged that even with increased capacities
under subsequent general permits, both facilities would remain non- compliant, and that it
expected stockpiled green waste to be significantly reduced by the end of the permit period on
June 30, 2005. DEM personnel stated that the stockpiles were not reduced by June 30, 2005,
but have since been significantly reduced.
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Chapter 3 GREEN WASTE PROGRAM
A letter from DOH to HMR dated February 15, 2005, warned of a complaint received by
DOH's Clean Air Branch regarding fugitive dust emissions at the Kona site in violation of
HAR §11 -60.1 -33. However, there was no documentation in the program file regarding
departmental or contractor follow -up and/or resolution of the complaint.
A letter from DOH dated February 15, 2005, warned that the operation of a Diamond Z
Manufacturing Model 1463 tub grinder with a Caterpillar diesel engine generator without a
covered source permit was in violation of HRS §342B -11 and HAR §11- 60.1 -52. The letter
indicates that DOH elected to serve informal written notice of the violation rather than pursue
its remedies which included administrative, civil, or criminal penalties, but reserved its right
to do so if the contractor failed to submit a covered source application within 60 days. The
letter further states that failure to submit the application within the 60 days would result in
further action, which could have included imposition of civil and administrative fines of not
more than $25,000 per day per violation. No documentation of follow -up or resolution was
observed in the program file. Auditors subsequently asked DEM Director Bell whether she
had a copy of the permit application and approval. DEM secretary Sharon Henry provided a
file relating to HMR's contract; however, that file only contained a copy of the DOH violation
notice dated February 15, 2005. Ms. Bell further indicated that since the violation notice was
received near the contract expiration date, possibly no action was taken in response to the
violation notice. According to DOH -Clean Air Branch's David Wong on April 6, 2006, no
covered source application had been submitted.
Possible Procurement Violations
File documentation indicates possible procurement violations pertaining to the green waste program
on three occasions during the audit period:
The first possible violation relates to emergency hauling of mulch from the Kona site from
April to June 2005. No file documentation was observed regarding invoices paid, or the
events or decision- making and authorization process leading to the emergency hauling. HAR
§3- 122 -90 requires that "the head of the purchasing agency responsible for the emergency
procurement shall prepare a written determination requesting the approval from the chief
procurement officer ..." DEM did not comply with this requirement. In a letter from Solid
Waste Division Head Mike Dworsky to Finance Director William Takaba dated
October 6, 2005, acknowledging the violation Mr. Dworsky states, the emergency haul was an
attempt to bring the West Hawaii site into compliance with the DOH permit issued in March
2005. The March 14, 2005 letter from DOH granting said permit stated:
"The department expects the permitees to significantly reduce the volume of the
stockpiled Greenwaste before the end of this permit. However, based on the
amount of Greenwaste currently stored at the site, the facility may not meet the
storage capacity limit in Part II- Special Condition Item No. 12 before the permit
ends. If this is the case, the department may require increased grinding frequency
and processing requirements in any future permits in order to meet and maintain
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Chapter 3 GREEN WASTE PROGRAM
the height and volume limits of the stockpiled Greenwaste as specified in the
Part II- Special Conditions Item No. 12."
Thus, the procurement does not appear to qualify as an emergency under HRS §103D -307.
Based on the total expenditure, the procurement qualifies as a small purchase under HRS
§103D-305. However, even under this code section, the procurement remains a violation, as
HAR §3- 122 -77 requires solicitations of quotations and maintenance of a quotations file.
Review of Supplemental Contract No. 3 indicates that the contractor was to "deliver the
processed Greenwaste to any site the County specified within a (10) mile radius of either the
Hilo or Kona sites at no additional charge, and to any site outside of the (10) mile radius to be
paid at a rate of $60 per hour." Pursuant to a letter from Solid Waste Chief Dworsky to
Finance Director Takaba dated October 6, 2005, the delivery area for emergency hauling
would have included the 10 -mile radius of the Kona site. However, after review of DEM's
spreadsheet recapping emergency deliveries, it appears that none of the deliveries were within
the 10 -mile radius. Upon inquiry, Recycling Coordinator O'Hora -Weir confirmed that the
contractor continued to make all deliveries within the 10 -mile radius, and that the County only
paid for deliveries outside of the 10 -mile radius. A recap spreadsheet provided by DEM
indicates that the department paid as much as $83.09 per hour to haulers to deliver the mulch
even though the contractual rate for deliveries outside of the ten -mile radius was $60 per hour.
According to contract terms, the contractor was also obligated to expend a minimum amount
on advertising to the public that mulch was available for pick- up. No documentation in the
program file indicates that the contractor complied with this requirement. A letter from HMR
to DEM Director Bell dated November 10, 2003, cites radio ads sponsored by the contractor,
but no supporting documentation is included. It is uncertain whether the emergency hauling
was necessary due to insufficient or ineffective advertising.
The second possible violation relates to Supplemental Contract No. 2 awarded to HMR. In a
letter dated March 30, 2004, from Purchasing Agent Bill Gray to DEM Director Bell, the
Purchasing Division questioned "material changes to the contract" and whether these changes
had been contemplated in the original scope of RFP No. S -3603. It is unclear, based on file
documentation, whether these changes were deemed a violation of HRS §103D and /or
HAR §3- 125 -3. However, two additional supplemental contracts approved by purchasing were
issued to HMR.
While the third potential violation occurred in fiscal year 2002 -2003 and was not included in
the scope of this audit, repercussions impacted the audit period and may not have been
ultimately resolved. This potential violation was procedural rather than necessarily statutory
in nature. The DEM program file includes a copy of an e-mail from Recycling Coordinator
O'Hora -Weir to HMR Community Relations Director Rene Mansho dated July 1, 2005,
containing the passage: "with regard to the contract forgery allegations put forth by Mr. James
Banigan at the site today our attorneys are addressing the issue." No further documentation
was observed in the program file to further explain the circumstances leading up to such an
allegation or a resolution of this matter. Ms. O'Hora -Weir indicated that subsequent to
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Chapter 3 GREEN WASTE PROGRAM
signing of the original contract by HMR General Manager James Banigan in July 2002, HMR
Operations Manager John Ross requested that contract language be revised during a visit to
the DEM Office. Present at the visit were DEM Director Bell and DEM secretary Henry. The
revised wording was agreed upon, and Ms. Henry typed and printed out a revised contract.
Apparently, the decision was made to "white out" the page number on the original signature
page and renumber it as the signature page for the revised contract. However, DEM did not
obtain Mr. Ross' or Mr. Banigan's initials as authorizing the revisions. Upon termination of
the HMR contract in June 2005, Mr. Banigan raised the issue of the "forged" contract
claiming no knowledge of the revisions. Subsequently, Mr. Banigan confirmed that Mr. Ross
is an authorized agent of HMR. Mr. Banigan also executed four supplemental contract
agreements confirming revisions made in the original contract.
When asked whether DEM had a copy of HMR's equipment permit for this contract (April
2006), Ms. Henry provided a file that included the following correspondence:
o A letter to Mayor Kim and Council Chair Stacy Higa from Assistant Corporation
Counsel Gerald Takase dated August 3, 2005, which includes the excerpt:
"In conclusion, we find that the switching of contract pages was poor
contracting procedure and the lack of acknowledgement by Hawaii Metal
Recycling to the changes in the contract could potentially invalidate the
agreement. However, even assuming we find no corroboration from John Ross
as to the changes, based on the e-mail correspondence and the fact that some of
the amendments actually came from Hawaii Metal Recycling, we find no
intent by the Director of Environmental Management to forge the documents
with an intent to defraud Hawaii Metal Recycling. The changes made to the
agreement actually help Hawaii Metal Recycling and therefore, we find no
motive or intent to default."
o A letter from Corporation Counsel Lincoln Ashida to HMR's James Banigan dated
September 6, 2005, which includes the excerpt:
"You are free to report this incident to an independent investigatory agency,
for the purposes of having the County and /or Ms. Bell investigated for any
criminal or civil wrongdoing."
Upon inquiry to DEM secretary Sharon Henry and Corporation Counsel Lincoln Ashida on
April 5, 2006, auditors were advised that further communication has been received on behalf
of HMR regarding this matter.
Other Issues
Review of program files also raised the following concerns:
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Chapter 3 GREEN WASTE PROGRAM
DEM's FY 2004 -2005 annual report to DOH incorrectly includes 55.07 tons of green waste
which had already been included in its FY 2003 -2004 annual report. The error was due to
inclusion of reported tons processed, not total tons paid in the FY 2003 -2004 annual report,
then using total tons paid rather than total reported tons processed when preparing the FY
2004 -2005 annual report.
The contractually required "certificates of insurance" were included in the program file.
However, the additional insured was listed as the "County of Hawaii, Department of Public
Works," even though the original contract and all supplements were issued through the
Department of Environmental Management.
Gross vehicle weight on scale tickets frequently exceeded the 88,000 pound limit allowed
without a special permit, as required under HRS §291- 35(3). HMR was notified of the weight
limit, since records indicate that the scale house attached a notification sticker to the weight
scale ticket on at least one occasion. However, records continue to indicate weights over the
88,000 pound limit after the notification date. There is no documentation in DEM files as to
the department's actions pertaining to this potential violation.
Original RFP No. S -3603 provided that the County was to provide an approximately one -acre
site, cleared and grubbed, as is, for use in the green waste program in Kona, with any
improvements included in the contractor's plan of operations to be installed at the contractor's
sole expense. A Request- for -Quote (RFQ) was issued on March 19, 2004, followed by
Purchase Order No. 30312 in the amount of $9,843.68 for grading and site work. However,
an additional $15,000 was subsequently requested by DEM and approved by Department of
Finance based on discussions with Recycling Coordinator O'Hora -Weir on
December 28, 2005, this expense pertains to prepping of an additional area since the original
site located at the Kailua landfill was too small and narrow.
In 2004, DEM established a five -acre site for "staging, storing and distribution of processed
mulch at, TMK 7- 4- 020:007, Kealakehe." Final plan approval granted by the Planning
Department on February 4, 2004, required that activities terminate no later than December 31,
2004, unless a written request for extension was submitted and approved. Located within
DEM files was a memo dated September 14, 2004, from Recycling Coordinator Ohora -Weir
to DEM secretary Ms. Henry, asking that a letter of request for extension be prepared. Also
located were an extension request letter to the Planning Department dated September 15,
2005, and an approval letter from the Planning Department dated October 5, 2004, granting an
extension to December 31, 2005.
According to Ms. Ohora -Weir, the stockpiles of unprocessed green waste at the inception of
HMR's contract were approximately 3,000 to 5,000 tons at the Kona site and roughly 3,000
tons at the Hilo site. She also estimates that at the conclusion of HMR's contract on June 30,
2005, the unprocessed mulch remaining was approximately 3,000 to 5,000 tons in Kona and
10,000 to 12,000 tons in Hilo. Current contractor EKG's Ruebens Fonseca was contacted by
the auditors in January 2006 in an effort to obtain an independent estimate of processed and
unprocessed tonnage of green waste stockpiled at the Kona and Hilo sites upon termination of
HMR's contract in December 2005, and his estimate of subsequent green waste tonnage
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Chapter 3 GREEN WASTE PROGRAM
coming into each site on a monthly basis. Mr. Fonseca indicated that EKO was still trying to
analyze figures on monthly inflow tonnage, and that he would provide the information,
together with an estimate of existing tonnages at contract inception. However, to date, EKO
has not provided the requested information to the audit team. Normally, auditing procedure
would call for recalculation of claimed tonnages by adding verifiable inflows to existing
tonnage at contract inception and subtracting remaining tonnage at contract conclusion. The
recalculation here is not reliable since no verifiable inflow measurement is available.
Findin s
1. The County does not have a clear plan for addressing solid waste management.
The purpose of the County's Updated ISWMP appears to be to satisfy statutory requirements
rather than to provide a strategic plan for addressing County solid waste streams. It does not
appear to be a cohesive plan in light of significant differences between the County's
legislative and administrative branches regarding diversion and recycling efforts. This lack of
agreement translates into poor guidance and direction for DEM, inefficient use of County
resources, a lack of accountability, and a reactive rather than proactive approach to addressing
solid waste issues.
2. The County Code is not in agreement with Hawaii Administrative Rules.
• The Hawaii County Code does not reflect the banning of green waste from County landfills
as required by HAR § 11- 58.1- 65(b).
3. The Updated ISWMP does not reflect the current status of County handling of green waste.
4. Landfill operation plans do not coincide with the County's Updated ISWMP regarding
banning of green waste.
5. DEM and its contractor did not comply with DOH permit conditions for the Hilo and Kona
sites.
• Stockpiles of both processed and unprocessed green waste exceeded the amount and
dimensions stipulated in DOH site permits.
• Sites were only permitted under "permit by rule" until March 14, 2005, though they had
ceased to qualify for "limited impact" permitting prior to the audit period.
• Both the Hilo and Kona sites were out of compliance with buffer zone requirements between
storage piles and site boundaries.
• The contractor had not obtained necessary permits required for operation of its processing
equipment (Diamond Z tub grinder).
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Chapter 3 GREEN WASTE PROGRAM
The contractor received warnings from DOH regarding its failure to comply with permit
requirements for control of fugitive dust emissions.
• Without further documentation, it appears that the contractor may have violated HRS §291-
35(3) relating to maximum vehicle weight of 88,000 pounds permitted on public roads on
several occasions.
6. DEM violated procurement law on at least one occasion.
DEM contracted for "emergency hauling" of processed green waste without the involvement
and oversight of the Purchasing Division.
DEM was also questioned by the Purchasing Division as to compliance with procurement
policy regarding material changes to project scope during the contract negotiation period.
7. DEM did not clearly delineate contractor requirements in its procurement and contract
documents.
DEM severely underestimated monthly incoming volumes of green waste in its RFPs. RFP
No. S -3603 called for the processing of 4,000 tons annually at both the Hilo and Kona sites.
The reported tons processed were:
FY 2003 -2004
FY 2004 -2005
Hilo 6,961.16
11,369.15
Kona 10,708.27
22,848.02
DEM issued RFP No. S -3603 calling for the processing of 4,000 tons annually at both the
Hilo and Kona sites, but did not stipulate that a general permit rather than a "permit by rule"
(limited impact permit) would be required from DOH.
• While the purpose of an RFP (Request for Proposal) as opposed to an IFB (Invitation to Bid)
is to allow proposal of a variety of solutions and processes to accomplish an end result, the
RFPs issued for green waste processing lacked specific measures and controls to provide for
accuracy of data, thresholds for compliance, and benchmarks against which results could be
evaluated. As a result, concerns were raised by the Purchasing Department relating to
procurement code compliance, protracted time required for contract negotiations, the need for
frequent contract revisions and subsequent contractor disputes.
Specifically, DEM failed to include monitoring and control requirements in its procurement
and contract documents addressing:
• Standardized reporting of vehicle tare weights.
• Standardized reporting on scale weight tickets.
• Required procedures if a County certified scale is unavailable.
• Required procedures for weighing of vehicles after delivery of processed mulch to County
storage sites.
• Required procedures for verification of end -user delivery.
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Chapter 3 GREEN WASTE PROGRAM
DEM also lacked formal policies and procedures and personnel trained in contract
procurement which combined to increase the County's risk exposure relating to:
• Improper handling of contract revisions leading to allegations of forgery.
• Issuance of contracts and supplemental contracts several months into contract periods.
8. DEM did not verify the accuracy of contractor claims reports or monitor vendor
compliance with other contractual obligations.
• County personnel were not consistently assigned to monitor green waste processing and scale
house operations to assist in verification of billed tonnages.
Errors were noted in the annual solid waste reports submitted to DOH:
• The 1503.58 tons reported as processed in May 2004 are shown as having been processed
at the Kona site, while the contractor invoice indicates that the tonnage was processed at
the Hilo location.
• DEM's annual report for fiscal year 2004 -2005 includes 55.07 tons of green waste which
had already been included in the 2003 -2004 annual report.
• HMR was paid for processing less than the minimum monthly tonnage required on two
occasions though unprocessed stockpiles at both the Hilo and Kona sites exceeded DOH
permit maximums.
• Certificates of insurance submitted by HMR list the "County of Hawaii, Department of Public
Works" as the additional insured rather than the "Department of Environmental
Management."
• Program files do not include documentation of advertising and public notices published by
HMR that free mulch was available for public pick -up.
Recommendations
1. We recommend that a cohesive vision be developed to address solid waste management in
Hawaii County, including input from the general public, Environmental Management
Commission, Department of Environmental Management, the Mayor, and the County
Council. The Updated ISWMP needs to be revised to reflect this vision. Most importantly,
a "working plan" needs to be developed to supplement the County's Updated 1SWMP that
addresses, at a minimum, a detailed task schedule and implementation of a formal process
for frequent progress review.
2. We recommend that the Hawaii County Code be amended to address the banning of
household and commercial green waste from County landfills in accordance with Hawaili
Administrative Rules §11- 58.1- 65(b).
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Chapter 3 GREEN WASTE PROGRAM
3. We recommend that Landfill operation plans need to be updated in accordance with
current statutory and regulatory requirements and the County's Updated ISWMP, and
communicated to landfill management, operations personnel, contractors, and the general
public.
4. We recommend that DEM develop and implement formal policies and procedures for
responses to any and all regulatory agency warnings and violation notices, including to
whom and when these warnings and notices should be communicated, and procedures to
ensure timely follow up and resolution.
5. We recommend that DEM determine whether a dedicated personnel position should be
tasked with the responsibility for monitoring of contracts and contractor compliance.
Oversight duties would include ensuring:
• All procurements are made in accordance with State and County procurement codes.
• All procurement documents (RFP's, IFB's, etc.) and contracts contain sufficient controls and
protections.
• The procurement process is initiated and completed in a timely manner.
• Compliance with applicable permitting and other regulatory requirements.
• Compliance with contractual requirements and evaluation of contractor performance.
6. We recommend that DEM establish standardized internal policies and procedures for
program documentation and reporting.
• Program file documentation should be complete and current as to any and all intea- and inter-
departmental, regulatory agency, and vendor communications. Program files should also
include a chronology of complaints or violations and documentation of their resolution.
• Program file documentation should be complete and current as to any permits, reports, plans,
and other program documents submitted by the department or contractors in accordance with
governmental or regulatory agency requirements. Program files should also include a
schedule of what reports are required, when they are due, and to whom they need to be
distributed as well as written procedures detailing source data required for each report and
how data is to be collected and compiled.
7. We recommend that DEM establish standardized policies and procedures to permit
verification of contractor claims reports and reduce the risk of fraud and/or abuse
including but not limited to:
+ Implement necessary policies and procedures to accurately measure in -flow volumes of green
waste.
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Chapter 3 GREEN WASTE PROGRAM
• Delineate information required on scale tickets.
• Require identification of all contractor vehicles, including vehicle description, license
number, and tare weights.
• Require contractor vehicles to be weighed at a County scale house before and after deliveries.
• Place County personnel at processing sites to monitor weighing of unprocessed and processed
mulch.
• Develop a checklist for approval of contractor claims, including review for mathematical
errors, reconciliation with scale tickets, and authorization of any deviation from contract
requirements (i.e.; minimum processing weights).
• Consult with the Finance Department and Corporation Counsel on the process and
documentation required for removal of contractors from "acceptable vendor" status for non-
performance.
8. We recommend that DEM establish standardized policies and procedures for monitoring
and documenting vendor compliance with other contractual obligations including but not
limited to:
• Review certificates of insurance provided by contractors for accuracy and dates of coverage.
• Require documentation of advertising efforts undertaken by contractors, including samples of
promotional and educational materials and invoices from newspapers and other media sources
to confirm their publication and distribution.
9. We recommend that DEM obtain accurate estimates of green waste volumes to be processed
for inclusion in procurement documents.
Subsequent Events
Currently, DEM is attempting to implement a green waste tipping fee for commercial generators.
However, DEM Director Barbara Bell advises that tipping fees cannot be implemented until a green
waste site with scales is operational at the Pu`uanahulu landfill. DEM's plan is to continue a "small"
load drop site at Kealakehe. Fees will be based on a standardized rate per vehicle size at Kealakehe
due to the lack of a certified scale, and based on scale weight at the Pu`uanahulu and Hilo landfills.
While this will provide reliable data as to incoming tonnage from commercial generators, it will not
provide a reliable check on total incoming tonnage since residentially generated green waste will not
be weighed at drop off.
Recycling Coordinator O'Hora -Weir advises that current green waste contractor EKO has made
significant progress in bringing the Hilo and Kona sites into compliance with DOH permit
requirements, with the only area of possible non - compliance being that of tonnage of stored green
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waste at the Kona site. She further indicates that EKO is also addressing maximum height limits of
processed mulch at the Kona public pick -up site.
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Chapter 3 SCRAP METAL PROGRAM
SCRAP METAL PROGRAM
Statutory Authority
Hawaii Administrative Rules (HAR) Section 11- 58.1 -33, "Solid waste salvage facilities," regulates
the construction and operation of materials recovery facilities. This includes, but is not limited to,
automobile dismantlers, scrap metal, white goods processors, and junkyards. A permit is required to
construct and operate a materials recovery facility. The application must contain a site plan and
analysis, design requirements for equipment, adequate drainage, nuisance, health and safety control,
as well as operational and closure plans. At a minimum, an annual report must be submitted to the
Director of the State Department of Health (DOH) no later than thirty days after June 30th of each
year. The report must detail the volume or weight in tons of incoming material and salvageable
material recovered, and how it was disposed.
With regard to acceptance of scrap metal at County landfills, HAR §11- 58.1 -65(c) provides that scrap
automobiles may not be accepted at disposal facilities that are permitted under HAR, and white goods
and motor vehicle tires may not be accepted at disposal facilities permitted under HAR after June 30,
1994. A plan must be developed by the operator of any solid waste disposal facility and included in
the facility operations plan to implement this ban.
The procurement process is regulated by the Hawaii Revised Statutes (HRS) Chapter 103D,
"Hawai`i Public Procurement Code," and HAR Chapters 3 -120 to 3 -132, "Procurement Policy
Board."
Audit Narrative
Procurement
Invitation -For -Bid (IFB) No. 2048, entitled "Price Agreement for Removal and Disposal of Junked
Vehicles and Waste Metal from the County of Hawaii Department of Environmental Management,
Solid Waste Division East and West Hawaii Sites," was published on December 12, 2002.
Addendum. No. I to IFB No. 2048 was issued on December 26, 2002, to meet the County's goal to
have old scrap metal material removed from both sites within the shortest possible time, preferably
within two to four years. The amount to be removed quarterly was to be determined primarily by
funds available and the amount of the successful bidder's unit price. The addendum also allowed the
contractor to establish a small area at each site to store non - metallic waste until accumulation of a full
truck -load that would then be disposed of at the respective landfills.
Addendum No. 2 to IFB No. 2048 was issued on January 14, 2003, to specifically address the old
scrap pile at the Kona site and the handling of non - metallic materials defined as trash and /or garbage
that would normally be deposited into the Kona landfill. The contract provided that: 1) rocks and
soil may be left on -site; 2) small scraps of trash less than one cubic inch in size may be left in place
along with the dirt and rocks; 3) any materials, hazardous or otherwise, which may have combined
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Chapter 3 SCRAP METAL PROGRAM
with soil may also be left in place; and 4) after removal of all metal material and debris, the
contractor must leave the site reasonably level.
Award and Contracts
During the procurement process, five bids were received and considered on January 17, 2003. The
lowest bidder submitted its proposal by facsimile transmission, but did not send a hard copy within
the required two days from bid opening and subsequently had its bid rejected. The review committee
recommended the award be made to the second lowest bidder, Island/Atlas Recycling. The proposal
was submitted by James G. Nutter of Island Recycling/Recycling Depot and Michael J. Allen of
Environmental Recycling of Hawaii, Ltd. /Atlas Recycling Center. On March 28, 2003, Contract No.
3136 was issued to Big Island Scrap Metal (BISM), a limited liability company registered with
Department of Commerce and Consumer Affairs on February 25, 2003, whose principal members are
Island Recycling and Atlas Recycling, in the amount of $125,000 for a term of ten years.
Contract No. 3136 called for a minimum of 6,000 tons to be processed annually and shipped off -
island from both the Hilo and Kona sites, plus processing each quarter of 15 percent of the existing
old scrap metal stored at Kealakehe. Thus, approximately 60 percent of existing old scrap metal at
the Kealakehe site was to be removed in the first year of the contract and 40 percent during the
second year. The contract set the contractor's compensation at $144.90 per ton for new scrap metal
and $244.90 per ton for old scrap metal, plus or minus the price differential between the base price of
$53 per ton as published in the American Metal Market (AMM) index dated January 14, 2003, and
the prevailing market prices for the commodities published in the AMM index at the time of
shipment. This resulted in a average per ton cost for new scrap metal of $116.83 for fiscal year
2003 -2004 and $102.90 for fiscal year 2004 -2005, and an average per ton cost for old scrap metal of
$234.90 for fiscal year 2003 -2004 (with none processed in fiscal year 2004 - 2005). A description of
the location and dimensions of the old scrap metal pile was included in the contract and stated that
the contractor and the County would work out a mutually agreeable arrangement for notification to
and observation by the County of the removal of the "old" scrap pile.
Two DOH permits were issued for the period August 6, 2003 to August 5, 2008, listing the County
and BISM as co- permittees, with BISM as operator and the County as owner of both landfills. Solid
Waste Management (SWM) Permit No. SV- 008 -03 was issued for the Salvage Facility at the Hilo
landfill, and SWM Permit No. SV- 009 -03 was issued for the Salvage Facility at the Kona landfill.
Major permit limitations for each facility included maximum storage capacity of 150 unprocessed
vehicle units, 150 unprocessed white goods units, '500 processed vehicle units, 300 processed white
goods units, 400 cubic yards of scrap metal, one 40 -foot container of batteries, and one 40 -foot
container of tires; maximum on -site storage of hazardous materials prior to disposal; submission of
an environmental assessment to include an evaluation of past operations and activities, identification
of potential environmental impacts, regular sampling and analysis to identify existing areas of
concern; inventory, inventory removal, and site upgrade plans showing paved surfaces at the holding
area(s), containment measures and storage of used oil, lead acid batteries, tires, gasoline and diesel
drained from vehicles._
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Chapter 3 SCRAP METAL PROGRAM
During fiscal year 2003 -2004, three supplemental contracts were issued:
• Supplemental Contract No. 1 issued on September 18, 2003, in the amount of $300,000,
increased the original contract amount to allow for additional removal and disposal of junked
vehicles and waste metal. The contract was modified in the following major respects:
o Any new unprocessed metal stored at the respective waste metal processing area shall be
managed in an orderly fashion that meets the approval of the State and County. Orderly
fashion shall mean that all vehicles will be stacked right side up and no higher than 15 feet
from the ground. All other scrap metal will be neatly stacked with items needing special
attention such as refrigerators, air conditioners, and propane tanks segregated for
processing. Adequate driving lanes shall be maintained for incoming scrap metal. The
site shall be kept free of hazardous materials and spills of industrial liquids of any kind.
At no time shall the Contractor store either unprocessed or processed metal such that it
encroaches on properties adjoining the County's processing areas.
o Specification l (a) of the original Contract shall be deleted and replaced with the
following:
"The Contractor shall have the exclusive rights and responsibility to salvage all scrap
metal, such as junked vehicles, appliances and all other forms of scrap metal from the
designated County facility. Contractor shall accept and process all metal currently on
site(s) plus all scrap delivered to site(s) by county, private tow operators and other
commercial haulers and private citizens. All materials processed by the Contractor
shall become its property and responsibility only upon removal from the County
facility. Auto hulks stuffed with old batteries, used motor oil, and other hazardous or
potentially hazardous waste will become the responsibility of the County to take action
within one business day upon written notification from the contractor, except for
materials in the "old Scrap" pile at Kona. At that site the segregation of all waste will
be the responsibility of the Contractor. At all times Contractor(s) shall process enough
material at each site awarded so that the amount of unprocessed scrap does not
significantly increase anytime during the contract period, provided funds are available.
Contractor shall agree to reasonable height and tonnage limits to be maintained for
unprocessed and processed materials."
o The Contractor acknowledges and reaffirms its duty to comply with all County, State and
federal .laws in performance of the contract, including, but not limited to, any new or
existing requirements stipulated by the State DOH regarding wash water collection,
treatment and/or disposal.
o It will be assumed that all scrap from the Kona site is "current scrap" to be paid at the
lower contract rate unless the contractor's invoice is accompanied by the County's
Inspection Form dated September 2003, and signed by an appropriate County employee
specifying the percentage of "old scrap" contents eligible for payment at the higher
contract rate.
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o It is agreed that at some time during the contract (expected to be two to three years from
contract commencement), the County intends to move its current metal processing area
from the Hilo Transfer Station to a new site in conjunction with developments addressing
the closure of the East Hawaii landfill. The County may alternatively construct the new
facility itself, conduct an independent IFB or RFP, or negotiate with a scrap metal
contractor to construct the facility on a cost - reimbursement basis to the extent that such
negotiations are authorized by law. The County will provide a minimum of six months
notice to the contractor, and no scrap would be expected to be moved from one facility to
the other. All necessary site improvements to the existing area used for scrap metal
processing, not limited to grading, filling, and construction of any necessary concrete
pads, will be the responsibility of the Contractor.
o The Contractor will weigh the empty container prior to loading with scrap metal, and
reweigh the same container after loading with scrap metal, to identify the tare weight and
derive an accurate weight of scrap metal contents.
o When a discrepancy occurs between weight receipts from a State of Hawaii certified
scale in the County of Hawaii and weight receipts or bills of lading from a location
outside the County, the price paid by the County shall be computed based on the weight
receipt from the certified scale in the County of Hawaii. The County will make every
effort to ensure that its scales used by the Contractor have been properly calibrated and, in
the case where a discrepancy exceeds one percent of the total weight, the County may
conduct an investigation to determine the source of error. If investigation results indicate
the County's scales are inaccurate, the scales will be recalibrated. At the discretion of the
Director, the amount paid during the period affected by the inaccuracy may be adjusted
and notification provided to the Contractor in writing.
• Supplemental Contract No. 2 issued on December 12, 2003, in the amount of $330,000,
increased the original contract amount to allow for removal and disposal of additional junked
vehicles and waste metal. The contract was modified in the following major respects:
o For the life of this contract, the Contractor shall accept all propane tanks delivered by the
public to scrap metal yards in Kona and Hilo. The Contractor may refuse to accept
propane tanks from propane vendors when more than one tank is delivered to the scrap
metal yard per occurrence and such tanks have not been properly evacuated with stem
valve removed. The Contractor shall display signage at both sites which clearly explains
this policy. For all tanks received from non - propane vendors, the Contractor shall be
responsible for the removal of any residual fuel and stem valves.
o The County will allow for the use of a small footprint of land on the southwestern edge of
the salvage compound in Hilo in the area formerly used by HMR for storing scrap metal.
The County shall grub, grade, and gravel the designated area for processing the existing
inventory of vehicles and other scrap on a temporary basis only. A concrete pad will be
formed and poured at the cost of the Contractor, and the area shall remain in use until the
County notifies the Contractor to evacuate the area in order to complete a site
characterization study already in progress. The Contractor agrees to evacuate the area
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upon notification by the County. Contractor shall be given a minimum of 72 hours notice
and must remove all equipment and stockpiled processed and unprocessed materials from
the area by the date and time stipulated by the County, or the County will employ the
necessary services to complete the evacuation and deduct said costs from the Contractor's
next payment.
o To address unforeseen conditions at the Kona scrap metal yard, the County is including an
extra rate for removal of debris remaining from the old green waste pile as depicted in an
attached sketch of the base yard. The remains of the pile are too contaminated to process
as green waste or scrap metal, and the material poses a threat to public safety and the
environment. The Contractor shall adequately characterize, profile, and manifest the
contaminated material proposed for disposal at the West Hawaii Sanitary Landfill
including conducting testing and analysis as necessary. The Contractor shall load the
material and haul it to the West Hawaii Sanitary Landfill in accordance with procedures
and policies established by landfill operator Waste Management of Hawaii, Inc. The
Contractor shall employ appropriate measures to contain fugitive dust during the loading
and removal of rubble. The County will waive its landfill tip fee and expects the
Contractor to clear the area as prescribed no later than January 31, 2004. The contractor
shall make every attempt to salvage any metal of value and may include the metal
recovered from remains of the old green waste pile with the current scrap for future
processing. The contractor shall also set aside large rocks/boulders and concrete greater
than one cubic foot, and work to recover any gravel or base course for beneficial use. The
Contractor shall be compensated at a rate of $150 per load for a truck with a 30 cubic yard
capacity. The material shall be hauled to Pu`uanahulu for landfilling, and the amount
available for this activity shall be capped at $15,000. Weight receipts from the
Pu`uanahulu scale house shall be submitted with invoices. The Contractor may request
reimbursement for the cost of conducting required testing of debris material remaining
from the old green waste pile, provided that a sampling/testing plan and cost estimate are
submitted in advance to the County for approval. Laboratory analyses and copies of waste
profile sheets shall accompany any invoices the Contractor submits for reimbursements.
o The Contractor shall demonstrate compliance with all conditions of SWM Permits Nos.
SV- 0008 -03 for the Salvage Facility at the Hilo landfill and SV- 0009 -03 for the Salvage
Facility at the Kona Landfill issued August 6, 2003, and meet all reporting requirements
in a timely manner.
+ Supplemental Contract No. 3 issued on March 3, 2004, in the amount of $500,000, increased
the original contract amount to allow for additional removal and disposal of junked vehicles
and waste materials. The contract was modified in the following major respects:
o Invoices dated on or between the 1St and 15th of any month shall be paid based on the
published American Metal Market price as of the 1St of that same month. Invoices dated
the 16`h through the last day of any month shall be paid based on the published American
Metal Market price as of the 16th of that same month.
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During fiscal year 2004 -2005, two supplemental contracts were issued:
• Supplemental Contract No. 4 was issued on November 3, 2004, in the amount of $500,000, to
continue efforts toward compliance with SWM Permits Nos. SV- 0008 -03 and SV- 0009 -03.
The contract was modified in the following major respect:
o Pertaining to processing at the West Hawaii site, the County will pursue a Request -for-
Quotations to conduct a survey of the boundary between the County's parcel (TMK: 7 -4-
20:16) and the adjacent land owned by Queen Liliuokaiani Trust. The County will also
pursue a Request- for - Quotations to sample residual soil from scrap metal piles to develop
a waste profile before transporting material to the West Hawaii Sanitary Landfill. The
County requests that the Contractor cooperate with any vendor selected to perform these
proposed activities, and the Contractor shall ensure that the areas where these activities
will occur are accessible to the selected vendors.
• Supplementary Contract No. 5 was issued on April 5, 2005, in the amount of $500,000,
increasing the original contract amount to allow for removal and disposal of additional junked
vehicles and waste metal. The contract was modified in the following major respects:
o The total amount of the Contract shall be increased by an additional $500,000.00 and
services shall be provided at prices per bid proposal dated January 16, 2003. This
supplemental price agreement is based on funds available in the current fiscal year.
Potential DOH Violations
DEM and BISM as co- permittees received warning letters from the Department of Health -Solid and
Hazardous Waste Branch (DOH -SHWB) regarding potential violations of SWM Permits SV- 0008 -03
and SV- 0009 -03 for the Hilo and Kona landfill sites.
A DOH -SHWB Inspection Report dated March 22, 2005, was received by the County and BISM,
based on an inspection to investigate a complaint that tires were not being handled in accordance with
permit requirements. The inspection found that BISM and the County were exceeding permitted
storage capacities for used oil, used tires, gasoline, and processed vehicles.
On June 15, 2005, DOH -SHWB issued a warning letter to DEM and BISM regarding exceeding
maximum limits for on -site storage of used oil, used tires, and gasoline. The letter also stated that
DEM and BISM had not submitted information in compliance with permit requirements regarding
paved surfaces at the holding area(s), impermeable surfaces and containment measures at the
processing area(s), secondary containment for used oil storage, appropriate storage for lead acid
batteries and tires, and impermeable surfaces and storage methods for gasoline and diesel drained
from vehicles. The letter further stated that DOH had not received additional information on the
County's proposed plan to close the Hilo and Kona facilities and construct new salvage facilities, and
was concerned that the scheduled removal of accumulated scrap metal from the Hilo facility by
November 2005 and the Kona facility by March 2006 was not being accomplished in accordance
with submitted plans. DOH -SHWB required that DEM and BISM provide documentation within 30
calendar days of receipt of the subject letter regarding corrective actions implemented, including:
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Chapter 3 SCRAP METAL PROGRAM
Reduction of used oil, used tires (including baled tires), and used gasoline to within
permitted levels as evidenced by copies of disposal receipts and storage of all such
materials in accordance with permit requirements.
2. Submittal of all information required under Part 1I, Paragraph 27, of SWM Permit Nos.
SV- 0008 -03 and SV- 0009 -03 regarding construction of paved surfaces at the holding
area(s), impermeable surfaces and containment measures at the processing area(s),
secondary containment for used oil storage, appropriate storage for lead acid batteries and
tires, and impermeable surfaces and storage methods for gasoline and diesel drained from
vehicles.
3. Cessation of all operations related to baling of tires, and submittal of requests to modify
existing permits to allow for baling of tires at both facilities.
4. Submittal of records for the period June 2003 to May 2005 for both facilities, showing
monthly total number and tonnage of vehicles, white goods, and scrap metal received and
processed, total number and tonnage of vehicles and white goods sold and recycled, and
total tonnage of scrap metal sold, recycled, or disposed of, together with copies of all
receipts for sale, recycling, or disposal of said materials.
5. Removal of accumulated scrap metal inventory at the Hilo facility by November 2005.
6. Removal of accumulated scrap metal inventory at the Kona facility by March 2006.
7. Completion of the preliminary environmental assessment at the Hilo facility by March 1,
2006, including an assessment report and proposed remedial actions.
8. Completion of the preliminary environmental assessment at the Kona facility by July 1,
2006, including an assessment report and proposed remedial actions.
DOH warned that if the foregoing corrective actions were not implemented within 30 days of receipt
of its warning letter, it could issue a formal Notice of Violation/Order pursuant to HRS §342H -9,
carrying a penalty of up to $10,000 for each separate offense, for each separate day of the offense. In
its June 15, 2005 letter, DOH also denied BISM's request for increased tire storage capacity at both
the Hilo and Kona facilities, and stated that tire baling would not be allowed until requests for permit
modifications had been submitted and approved.
By letter to DEM dated June 20, 2005, BISM submitted an amended operations plan and a request for
modification of SWM Permit Nos. SV- 0008 -03 and SV- 0009 -03 for the department's submittal to
DOH -SWMB. BISM also requested limits on maximum on -site storage of used oil, used tires and
gasoline be increased and requested extensions of inventory removal deadlines for accumulated scrap
metal at both the Hilo and Kona facilities. BISM stated that it could not comply with the November
2005 timeline for the Hilo facility due to a large amount of metal hidden by the adjacent rainforest,
and it requested that the March 2006 timeline for the Kona facility be extended for an additional two
years since metal had been buried and was difficult to remove. BISM further stated that permit
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3 SCRAP METAL PROGRAM
reporting and environmental assessment requirements cited in Corrective Action Nos. 4, 7, and 8 of
the DOH letter were responsibilities of the County rather than the contractor.
DOH sent a responsive letter dated July 22, 2005, stating that BISM and/or COH needed to submit
photographs of the following areas: paved surfaces at the holding area(s), impermeable surfaces and
containment measures at the processing area(s), secondary containment for used oil storage,
appropriate storage for lead acid batteries and tires, and impermeable surfaces and storage methods
for gasoline and diesel drained from vehicles along with the date for construction of the specified
environmental controls. DOH also requested clarification of the following items to evaluate BISM's
proposal for tire baling and increased storage capacity at both facilities: the frequency of tire baling
operations and maximum number of tires to be stored prior to baling, together with estimates of the
dimensions of the stockpiles and descriptions of vector control operations; and the quantity of tires
that will comprise each bale, the dimension of each bale, and the number of bales that can be placed
in a 40 -foot container for off -site removal and shipment. DOH stated that it would not increase
storage capacity for tires at either facility until justifications were provided, and it would evaluate
proposed increases in storage capacity for used oil and gasoline and extensions of scrap metal
removal deadlines at both facilities after documentation requested in Corrective Action No. 4 was
received.
DEM sent a responsive communication to DOH -SHWB dated August 29, 2005, attaching copies of
departmental records for the period June 2003 to May 2005 as requested in Corrective Action No. 4.
With regard to Corrective Action No. 7 and 8, DEM submitted the following information: Solid
Waste Management Permit Nos. SV- 0008 -03 and SV- 0009 -03 Salvage Facilities Preliminary
Environmental Assessment correspondence dated November 12, 2003; DOH response dated
December 4, 2003; recommendations regarding work at Hilo Landfill Site prepared by SOH -DOH
dated February 4, 2004; proposed Hilo Brownfields Mitigation Design prepared by URS dated
February 2004; Hilo Transfer Station Sampling and Analysis Plan dated March 2004; Phase I
Environmental Site Assessment dated March 31, 2004; Hilo Trench e-mail from Robert Muse dated
June 27, 2005; a Phase I Site Assessment for the Kona site from the United States Environmental
Protection Agency ( USEPA); a solutions report for the Hilo site prepared by USEPA consultant
Weston Solutions; and a proposed cap design for the Hilo site. DEM noted that since the County has
limited resources to analyze potential environmental impacts at the Kona and Hilo sites, USEPA
assistance is vital to completion of the necessary sampling and analyses required to prepare the sites
for closure and future development.
In its letter to BISM and DEM dated October 21, 2005, DOH responded to extension requests for
removal of accumulated scrap metal inventory at the Hilo and Kona salvage facilities. The removal
plan indicated that 700 tons of scrap metal per month would be removed from the Kona facility, and
1,000 tons of scrap metal per month would be removed from the Hilo facility. After reviewing scrap
metal processing logs, DOH determined that lesser amounts were being removed, leading to net
increases in accumulated scrap metal at both facilities. DOH indicated that deadlines would not be
met because removal activity levels were not being achieved (rather than because of additional
material being encountered). As a result, DOH did not approve the requested extensions, but
indicated that it may reevaluate requests if significant increases in scrap metal removal could be
demonstrated. In response to DEM's communication dated August 29, 2005, requesting approval for
capping of the current Hilo salvage facility, DOH stated that permit applications for both the Hilo and
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Chapter 3 SCRAP METAL PROGRAM
Kona facilities needed to include samplings to determine the nature and extent of contamination, and
proposals for required remedial action and construction of permanent processing areas to mitigate
future contamination. DOH found that studies transmitted by DEM did not satisfy this requirement.
Regarding closure of current facilities in Hilo and Kona and the establishment of new permanent
salvage operations at different sites, DOH required the County to submit permit applications for the
new facilities within 180 days of receipt of its October 21, 2005 letter. Upon review of the program
file, there were no current copies or supporting documentation to indicate that DEM has submitted
the required permit applications for the new facilities as required by DOH.
Correspondence and Other Related Issues
Observed in the program file was a letter from DEM Director Barbara Bell to BISM dated June 27,
2003, regarding weekly transitional reports not being timely, reports not containing sufficient
information, the operations plan needing to be revised with more detail on equipment and staffing,
and weekly status reports being mandatory.
Observed in the program file was a letter from the DEM Director Bell to BISM dated
October 24, 2003, regarding contractual issues of payment on weight differentials for past mainland
shipments, required shipping documentation, complaints from the public, operational hours, receipt
of excess batteries and tires, billing for old scrap, the inventory and removal plan, and the processing
area at Hilo.
Observed in the program file was a warning letter dated May 4, 2005, from DOH -SHWB to
Mr. Chad Hoffert of Northwest Demolition, concerning a complaint about storage at the Kealakehe
site of a large amount of re -bar which was not covered under the permit for the recovery facility. No
documentation was found in the program file to indicate whether this matter was resolved or is still
pending. Recycling Coordinator Eileen O'Hora -Weir advised that Northwest Demolition was doing
work on the Kona Lagoon Hotel with BISM's assistance. Northwest Demolition has subsequently
ceased processing of re -bars.
Tonnage Analysis
Total tonnage of scrap metal removed by BISM from both the Hilo and Kona sites was 11,264.26
tons for the 2003 -2004 fiscal year, and 9,400.06 tons for the 2004 -2005 fiscal year. On further
analysis, tonnage removed from the Hilo site was 7,143.77 tons (an average 595.31 tons per month)
for FY 2003 -2004, and 6,028.27 tons (an average 502.36 tons per month) for FY 2004 -2005.
Tonnage removed from the Kona site was 3,367.26 tons (an average of 343.37 tons per month) for
FY 2003 -2004, and 3,371.79 tons (an average of 280.98 tons per month) for FY 2004 -2005.
Additional analysis reveals that for FY 2003 -2004, an average of 595.31 tons per month of new scrap
metal (and no old scrap metal) was removed from the Hilo site, and an average of 284.04 tons per
month of new scrap metal and 32.59 tons of old scrap metal was removed from the Kona site. For
FY 2004 -2005, no old scrap metal was removed from either the Hilo or Kona sites (See Table 1.3
Below).
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Chapter 3 SCRAP METAL PROGRAM
Table 1.3
Scrap Metal Program
Big Island Scrap Metal
Tonnage Processed
Findings
1. There is insufficient documentation to explain the discrepancy between the name of the
entity bidding on the IFB (Island /Atlas Recycling) and the name of the entity awarded the
subject contract (Big Island Scrap Metal).
Second lowest bidder Island/Atlas Recycling was recommended by the procurement review
committee when the lowest bidder failed to submit a hard copy of its faxed proposal. However,
the contract was issued to Big Island Scrap Metal (BISM), but there is no documentation in the
program file to evidence the relationship between Island/Atlas Recycling and BISM.
2. DEM permitted the contractor to commence work and receive payment prior to the
contractor obtaining required permits.
A Notice to Proceed was issued to BISM on March 28, 2003, but permits to operate both Hilo and
Kona salvage facilities were not issued by DOH until August 3, 2003. BISM submitted Invoice
Nos. 1000 and 1000A dated June 2, 2003, which DEM paid on July 18, 2003; Invoice No. 1004
dated June - 20, 2003, which DEM paid on July 28, 2003; and Invoice No. 1011 dated July 21,
2003, which DEM paid on September 9, 2003, for work performed prior to issuance of permits
for both sites.
3. DEM failed to require the contractor to timely respond to DOH violation notices.
Observed in the program file were numerous letters from DOH -SHWB to BISM and DEM
regarding potential violations of SWM Permit Nos. SV- 0008 -03 and SV- 0009 -03, which are
discussed at length in the Audit Narrative above. Also observed in the program file were separate
response letters from BISM and DEM discussing possible remedies. However, the following
potential violations were still being cited in DOH correspondence dated January 4, 2006 and
January 6, 2006:
• Exceeding maximum on -site storage limits for used oil.
• Failure to store all waste tires in covered 40 -foot containers.
69
Yearly Total
Yearly Ave
New Scrap
Old Scrap
Hilo
Processed
Per Month
Ave Per Month
Ave Per Month
FY 2003 -2004
7,143.77
595.31
595.31
0.00
FY 2004 -2005
6,028.27
502.36
502.36
0.00
Kona
FY 2003 -2004
3,367.26
280.60
248.01
32.59
FY 2004 -2005
3,371.79
280.98
280.98
0.00
Findings
1. There is insufficient documentation to explain the discrepancy between the name of the
entity bidding on the IFB (Island /Atlas Recycling) and the name of the entity awarded the
subject contract (Big Island Scrap Metal).
Second lowest bidder Island/Atlas Recycling was recommended by the procurement review
committee when the lowest bidder failed to submit a hard copy of its faxed proposal. However,
the contract was issued to Big Island Scrap Metal (BISM), but there is no documentation in the
program file to evidence the relationship between Island/Atlas Recycling and BISM.
2. DEM permitted the contractor to commence work and receive payment prior to the
contractor obtaining required permits.
A Notice to Proceed was issued to BISM on March 28, 2003, but permits to operate both Hilo and
Kona salvage facilities were not issued by DOH until August 3, 2003. BISM submitted Invoice
Nos. 1000 and 1000A dated June 2, 2003, which DEM paid on July 18, 2003; Invoice No. 1004
dated June - 20, 2003, which DEM paid on July 28, 2003; and Invoice No. 1011 dated July 21,
2003, which DEM paid on September 9, 2003, for work performed prior to issuance of permits
for both sites.
3. DEM failed to require the contractor to timely respond to DOH violation notices.
Observed in the program file were numerous letters from DOH -SHWB to BISM and DEM
regarding potential violations of SWM Permit Nos. SV- 0008 -03 and SV- 0009 -03, which are
discussed at length in the Audit Narrative above. Also observed in the program file were separate
response letters from BISM and DEM discussing possible remedies. However, the following
potential violations were still being cited in DOH correspondence dated January 4, 2006 and
January 6, 2006:
• Exceeding maximum on -site storage limits for used oil.
• Failure to store all waste tires in covered 40 -foot containers.
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Chapter 3 SCRAP METAL PROGRAM
Failure to store lead acid batteries in covered containers with sealed acid - resistant bottoms.
• Failure to clearly label drums of used oil.
• Failure to store all used oil and other vehicle fluids in a covered secondary containment.
• Failure to store unprocessed vehicles that are damaged or leaking fluids on a paved,
concreted, or lined area with containment measures to control any accidental releases of fluids
or other contaminants.
• Failure to maintain the amount of "new" processed vehicles to less than 500.
• Failure to maintain the amount of new scrap metal to less than 150 cubic yards.
4. The County paid the contractor for shipping of non -metal hazardous waste in direct
contradiction of contract terms and possibly in violation of EPA regulations.
Based on available file documentation, it appears that BISM may have violated hazardous waste
laws by shipping acid -filled batteries without proper EPA permits. Attached to BISM's Invoice
No. 1097 dated June 16, 2004, were two separate Matson Navigation Company shipping
documents noting that acid - filled batteries were claimed and paid under a scrap metal invoice.
There were no contractual provisions for payments by the County for disposal of hazardous
waste. Supplementary Contract No. 1, Item 5, specifically stated: "Auto hulks stuffed with old
batteries, used motor oil, and other hazardous or potentially hazardous waste will become the
responsibility of the County to take action within one business day upon written notification from
the Contractor, except for materials in the `old scrap' pile at Kona." Contract terms only allowed
for payment of scrap metal claims.
5. DEM failed to require the contractor to provide supporting documentation for invoiced
amounts.
Observed in DEM's Invoices and Expenditures file were four BISM Invoices Nos. 1000,
1000A, 1011, and 1013 billing for processing from July to October 2003, which were
resubmitted for increases in originally invoiced amounts. Additional tonnage reflected in the
amended invoices totaled 60.147 tons at an additional cost of $8,997.68, which was paid by
the County. Original scale weight tickets were verified to invoices, but resubmitted weights
were registered by an off - island site. Correspondence from BISM to DEM Accountant Robin
Bauman dated August 20, 2003, indicates an agreement between the DEM Director and BISM
that final weights from an end -user would be considered most accurate and would ensure that
scrap metal had been shipped off - island. However, the contract states that if there is a
discrepancy between end market weights and County scale ticket weights, the County scale
ticket weights will prevail.
BISM Invoices Nos. 1159, 1175, 1180, 1189, and 1202 contained handwritten changes.
Though not more that $10 each, no documentation or notation was located in the program file
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Chapter 3 SCRAP METAL PROGRAM
to explain the changes for expense reconciliation purposes in accordance with generally
accepted accounting principles.
6. DEM failed to enforce timely compliance with contractual reporting requirements.
Observed in the program file was a letter from the DEM Director to BISM dated June 27, 2003,
regarding weekly transitional reports not being submitted timely, reports not containing sufficient
information, the operations plan needing to be revised with more detail information on equipment
and staffing, and weekly status reports being mandatory. Supplemental Contract No. I included a
provision that the contractor provide monthly written status reports to include equipment status,
regulatory compliance issues, operational logistics, and other matters relating to operations. No
response or subsequent documentation from BISM was observed in the program file to indicate
resolution of these issues.
7. DEM failed to follow up on issues raised with the contractor.
Observed in the program file was a letter from the DEM Director to BISM dated October 24,
2003, regarding contractual issues of payment on weight differentials for past mainland
shipments, required shipping documentation, complaints from the public regarding operational
hours, receipt of excess batteries and tires, billing for old scrap metal, the inventory and removal
plan, and the processing area at Hilo. No response or subsequent documentation from BISM was
observed in the program file to indicate resolution of these issues.
8. DEM failed to efficiently monitor its contract balances.
Contract balance tracking was performed using the Partial Delivery Receiving Report (PDRR), a
County form showing current payment amount and remaining contract balance, with the DEM
Accountant preparing a manual Excel spreadsheet to track the contract balance. The program file
indicates that contract balance tracking was kept current until January 2005. However, on or
about February 2005, BISM submitted three invoices totaling $148,615.56, creating a deficit or
negative contract balance of approximately $125,207.81, until certification of an additional
$500,000 was signed by the Finance Department on March 31, 2005. Subsequently,
Supplementary Contract No. 5 for $500,000 was issued to BISM on April 5, 2005.
In reviewing the County's General Ledger Account No. 075- 641 - 5641 -02 -115, auditors noted
that the journal entry encumbering the additional $500,000 was posted on March 7, 2005, and
BISM's two invoices were held for payment until April 1, 2005, with a third invoice being held
until April 5, 2005. It is not appropriate that a journal entry be posted on a date prior to funds
being certified by the Finance Department.
9. DEM's failure to adequately calculate existing scrap metal tonnages and monthly inflows
necessitated the issuance of several supplemental contracts.
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Chapter 3 SCRAP METAL PROGRAM
Recommendations
1. We recommend that DEM ensure that the award entity is a "legal" entity prior to contract
award and that there is sufficient documentation in the program file to explain
inconsistencies between the names of original bidders and names of vendors awarded
contracts during the procurement process.
2. We recommend that DEM ensure that personnel with sufficient training and expertise are
assigned to supervise the contract procurement process, including, but not limited to,
preparation of contractor reporting requirements specifying format, content, and frequency
of reports.
3. We recommend that DEM ensure that personnel with sufficient training and expertise are
assigned to monitor each contract after issuance to ensure departmental and contractor
compliance with all contractual, regulatory, and operational requirements.
4. We recommend that DEM ensure that proper permits are obtained prior to any contractor
commencing work on any contract on any County property.
5. We recommend that DEM ensure that contractors obtain necessary permits and provide
documentation of work performed before disbursing any County funds.
6. We recommend that DEM develop and implement policies and procedures to adequately
verify the accuracy and integrity of the contractor's claims of scrap metal removed from
County storage sites. At a minimum, policy and procedure should address sealing of disposal
containers and end -user verification that the seals are intact upon receipt of containers.
7. We recommend that DEM address any warning letter received from DOH -SHWB or any
other regulatory agency in a timely manner to avoid assessment of fines and penalties and
possible termination of permits.
S. We recommend that RFP and contract documents require contractors to respond within a
given time to any communications pertaining to complaints or deviations from program,
permit, or other regulatory requirements. It is also essential to document in the program
file any responses from and corrective actions taken by contractors.
9. We recommend that DEM document any operational problem with a contractor during the
administration of a contract. All correspondence, together with a chronology of events and
their resolution, should be documented in the program file. DEM should require contractors to
respond to any communications pertaining to operational problems. Adequate follow -up
procedures should also be implemented to ensure that contractor performance remains in
compliance with all contractual and regulatory requirements.
10. We recommend that DEM document its own departmental responses and corrective actions
taken to resolve operational problems. The department should develop and implement a
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Chapter 3 SCRAP METAL PROGRAM
training program for its personnel regarding standardized procedures for reporting and
documentation of events and their resolution.
11. We recommend that DEM adhere to contractual provisions particularly regarding vendor
compensation. Payment should not be made if a good or service is not covered under the subject
contract. A standardized payment checklist attached to the front of each contract folder would be
helpful in tracking eligible payments, including a list of contract requirements and timelines and a
column for initialing completion of tasks.
12. We recommend that DEM reconcile contractor invoices against supporting documentation
before processing payment. In the event that contractor invoices are resubmitted for payment,
DEM should require written verifiable documentation of revised amounts and properly document
departmental payment authorizations.
13. We recommend that DEM monitor fund balances to ensure that funds are available to pay
contractor invoices. DEM should properly post journal entries according to dates of approval.
No journal entry should be posted in advance of its date of approval by an authorizing body.
Accounting entries are regulated by GAAP, and it is improper to post items prior to approval by
an authorizing body.
14. We recommend that DEM implement processes and procedures to permit ongoing and
accurate measurement of incoming tonnages.
15. We recommend that DEM implement necessary changes to obtain accurate estimates of
volume to be processed for inclusion in procurement documents.
16. We recommend that DEM implement standardized project accounting utilizing the
County's FRESH financial accounting system to better monitor fund balances and to create
reports for dissemination to proper personnel on a regular and timely basis.
17. We recommend that DEM explore the possibility of exercising its right to assess fines and
penalties against contractors to enforce compliance with contractual terms and conditions.
• Hawai`i County Code §2- 204(a) provides:
"(a) If the Director determines that any person has violated or is violating any
provision of this article or chapter 20 or 21 or any rule adopted pursuant to these
chapters, the director may do any one or more of the following:
(i) Issue an order assessing an administrative penalty for any past of
current violation;
(ii) Require compliance immediately or within a specified time; and
(iii) Commence a civil action in the circuit court for appropriate relief,
including a temporary, preliminary, or permanent injunction, the
imposition and collection of civil penalties or other relief."
73
Chapter 3 HOUSEHOLD HAZARDOUS WASTE PROGRAM
HOUSEHOLD HAZARDOUS WASTE PROGRAM
Statutory Authority
On the federal level, management of hazardous waste is regulated under Title 40 of the Code of
Federal Regulations (CFR), Parts 260 through 279. 40 CFR, Part 261.4(b)(1) states that household
wastes are solid wastes that are exempt from the definition of hazardous waste and regulation under
Subtitle C of the Resource Conservation and Recovery Act (RCRA), but are still subject to regulation
under RCRA Subtitle D for non - hazardous solid waste. The EPA web site specifically states that this
exclusion of household waste is applicable to household hazardous wastes. 40 CFR, Part 271, allows
the Environmental Protection Agency (EPA) to authorize State hazardous waste management
programs to operate in lieu of the federal hazardous waste management program subject to authority
retained by the EPA. In order to grant authorization, the EPA must find that the State program is
"equivalent" to and consistent with the federal program and provides for adequate enforcement.
Hawaii was granted final authorization by the EPA in November 2001.
On the State level, management of hazardous waste is regulated under Hawaii Administrative Rules
(HAR), Title 11, Chapters 260 -280, and Hawaii Revised Statutes (HRS) Sections 342G and 342J.
HAR §11- 58.1 -62 (a) provides: "Owners and operators of solid waste disposal facilities shall
implement a program at the facility for detecting and preventing the disposal of regulated hazardous
waste as defined in 40 CFR Part 261 or the State of Hawai`i's rules or statutes, whichever is more
stringent, and polychlorinated biphenyls (PCB) wastes as defined in 40 CFR Part 761 into the solid
waste disposal facility." HRS §342G -25 mandates that the County's Integrated Solid Waste
Management Plan (1SWMP) include a household hazardous waste component. HRS §342G- 26(f)(1)
requires that the household hazardous waste component assess the quantity and type of hazardous
wastes generated by residences in the County. HRS §342G- 26(f)(3) further provides that the
household hazardous waste component shall: "Develop programs for the collection of household
hazardous wastes that protect the public and the environment from these substances. The household
hazardous wastes collected by the counties shall be disposed of by a state program. A county may
petition the director to be exempt from this paragraph if the county demonstrates to the director's
satisfaction the adequacy of its current methods of household hazardous waste collection, recycling,
exchange, and disposal to protect public health and the environment." HRS §342J provides that the
State's hazardous waste management program shall be preventive as well as regulatory with
systematic control over the generation, collection, source separation, storage, transportation,
processing, treatment, recovery and disposal of hazardous waste, including, but not limited to,
household waste.
On the County level, Hawaii County Code §20 -40(a) provides: "No person shall dump, place, or
remove to any County disposal facility, including transfer stations, any prohibited materials as
defined by the State department of health rules, regulations and standards, including any radioactive
or chemical waste, any pesticides, explosives, blasting materials, fuses, live ammunition, or other
substances that may explode upon contact with heat or fire."
The County's Updated ISWMP calls for the continuation of semi - annual household hazardous waste
collections, with the addition of a collection site in Waimea in 2006.
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Chapter 3 HOUSEHOLD HAZARDOUS WASTE PROGRAM
Audit Narrative
Contracts
Contracts covering fiscal years 2004 and 2005 for collection and disposal of household hazardous
waste were issued as supplemental extensions of Contract No. 03041 issued in fiscal year 2003 and
procured under Request - for - Proposal (RFP) No. S -3602. The original contract was for one year with
the possibility of three annual extensions. A notation in the Department of Environmental
Management (DEM) 2004 program file indicated that only one responsible bidder, EnviroServices
and Training Center (EnviroServices), responded to the original RFP. Its proposal, which was
incorporated by reference into the contract, stated the contractor was to set up "household waste
collections" for Hilo and Kona two times per annurn and deliver the collected waste to a qualified
disposal facility in compliance with all regulatory requirements and guidelines.
Supplemental Contract No. 1 for the period July 1, 2003 to June 30, 2004, in the amount of $140,036
was dated September 3, 2003. In reviewing the contractor's report of materials collected by site and
date, auditors noted discrepancies between the contractor's collections summary and shipping
manifests. Shipping manifests did not include all items and quantities shown on the contractor's
collections summary.
Supplemental Contract No. 2 for the period July 1, 2004 and June 30, 2005, in the amount of
$145,036 was dated October 7, 2004. It included several changes to the original contract: (1) the
County was to assume responsibility for program advertising; and (2) the contractor was to prepare a
cost estimate to conduct special collections of household hazardous waste materials that had
accumulated at County solid waste facilities subsequent to the last collection date, with total cost not
to exceed $8,000.
In discussions with DEM personnel, Recycling Coordinator Eileen O'Hora -Weir advised that the
department receives several calls per week from irate members of the community about the lack of
facilities to receive residential and commercial hazardous wastes. Auditors also understand that
certain hazardous wastes and banned wastes continue to enter County landfills since no systematic
screening is in place at transfer stations, scale houses, or landfills to screen sublayers of refuse and
contents in sealed waste disposal bags.
Possible State Department of Health (DOH) Violations
DEM and contractor EnviroServices may have been in violation of DOH transfer station permits
pertaining to "Additional Permit Conditions for Each Convenience Center, Number (4) ", which
states: "Should a Household Hazardous Waste Collection be conducted at a Transfer Station
facility, a notification of collection date, an updated operational plan, and a specific site layout
shall be submitted to the department for review and approval at least sixty (60) days prior to the
collection date. The HHWC operational plan shall include a site cleanup plan."
Upon inquiry to the DOH -Solid Waste Branch (DOH -SWB), environmental engineer Sue Liu
indicated that the County had not submitted plans. DEM was apparently unaware of this
requirement. DEM Director Barbara Bell and Recycling Coordinator O'Hora -Weir stated that
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Chapter 3 HOUSEHOLD HAZARDOUS WASTE PROGRAM
since DOH had never formally communicated this requirement, DEM had not submitted
collection event plans. In a follow up communication on April 7, 2006, Ms. O'Hora -Weir
indicated:
"During Lono Tyson's tenure around May FY 04 -05, we sent over a copy of the
operations plans provided by EnviroServices in their response to the 2002 RFP and a
copy of our generic poster listing locations, dates, times, accepted and not accepted
materials. Lono also included a sketch of each transfer station showing where the
HHW collections occur. I'm unable to locate a copy of the submission, but do recall
assisting Mr. Tyson in this submission. We can reproduce for DOH if they can't locate
on their side."
Possible Statutory Violations
* The County's current solid waste disposal facilities do not meet the hazardous waste disposal
requirements set forth in HAR §11- 58.1 -62(a) requiring implementation of a program at solid
waste disposal facilities to detect and prevent hazardous waste disposal.
Upon inquiry to DEM, Director Barbara Bell responded that she was unaware of and is unsure of
the meaning of the statutory requirement contained in HRS §342G- 26(f)(3), which provides that
household hazardous wastes collected by the counties shall be disposed of by a State program. In
a follow up inquiry, Recycling Coordinator O'Hora -Weir stated that:
"The statute is archaic as the State no longer has a Household Hazardous Waste
disposal program. The only State program currently is for used motor oil and
the County participates in that program."
She further indicated that she had spoken to Lene Ichinotsubo of DOH -SWB, and that
Ms. Ichinotsubo had confirmed that the only State program currently in place is for disposal of used
motor oil. Auditors contacted Ms. Ichinotsubo and requested that DOH provide some documentation
that this portion of the statute is no longer applicable. Ms. Ichinotsubo indicated she could provide
verification that the only state program currently in place is the used motor oil program, but could not
further address the applicability of the statute. Further inquiry and documentation by DEM are needed
to establish whether a statutory violation has occurred; what, if any, portion of the statute is
applicable; and what, if any, changes to the County's program are required.
Diversion Rate for Fiscal Year 2004 -2005
According to its web site, the EPA estimates that each person in the United States produces an
average of four pounds of household hazardous waste each year. The 2004 Hawaii County Data
Book indicates a population of 162,601 residents as of July 1, 2004. Based on these figures, the total
household hazardous waste generated in the County during fiscal year 2004 -2005 would have been
approximately 325 tons. According to DEM's 2004 -2005 annual report to DOH, 86.32 tons of
household hazardous wastes were collected by EnviroServices during its four semi - annual
"household waste collection" events. This represents a diversion rate of approximately 26.5 percent,
and a landfill rate of approximately 73.5 percent.
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Chapter 3 HOUSEHOLD HAZARDOUS WASTE PROGRAM
Findings
1. The County's current solid waste system or process does not meet the statutory
requirements of HAR §11- 58.1 -62 (a) for detecting and preventing the disposal of regulated
hazardous waste in solid waste disposal facilities.
• Household hazardous wastes continue to be disposed of in County landfills due to a
combination of factors:
• Physical inspection of all incoming waste at landfills is not currently feasible.
• Not all residents are educated as to proper disposal of hazardous wastes.
• Not all residents will follow proper disposal practices.
• No permanent sites exist for the ongoing collection of specific hazardous wastes.
2. DEM management is not fully acquainted with all regulatory and reporting requirements
applicable to the County's household hazardous waste program.
• DEM is unsure of the meaning of hazardous waste disposal requirements contained in §HRS
342G- 26(f)(3). Though the statute is not currently being enforced by the State, the department
should be aware of its existence and should obtain a written determination from DOH of its
applicability.
• DEM was unaware of Convenience Center Permit condition number 4, requiring that if
household hazardous waste collections are held at transfer stations, the County must file a
notification of collection date, an updated operations plan, and a specific site layout for DOH
review and approval 60 days prior to each event.
3. Public support for the County's semi- annual household hazardous waste collections events
is high.
The County's household hazardous waste program experienced a 62 percent increase in
tonnage collected during fiscal year 2004 -2005, indicating strong public support for proper
hazardous waste disposal, recycling, and diversion.
4. The absence of permanent County hazardous waste collection facilities promotes illegal
disposal at landfills and illegal dump sites.
Although semi - annual collection events are increasingly successful, calculations based on
EPA estimates of annual household hazardous waste pounds generated per capita, 2005
County Data Book population statistics, and fiscal year 2004 -2005 diversion rates, indicate
that only about 26.5 percent of household hazardous wastes had been diverted or recycled in
the County. This leaves an estimated 73.5 percent, or approximately 238 tons of hazardous
waste, being disposed of in the County's landfills or at illegal dumpsites.
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Chapter 3 HOUSEHOLD HAZARDOUS WASTE PROGRAM
5. DEM's monitoring, control, and reconciliation procedures related to household hazardous
waste collection and contractor billing are inadequate.
Contractor claims of household hazardous waste collected at semi - annual events do not
reconcile with documentation for end disposal. The accuracy of contractor reports for
weights collected and for weights disposed cannot be independently corroborated.
• Documentation from certified reuse and disposal facilities verifying end disposal of household
hazardous wastes by waste type cannot be found in DEM program files.
Recommendations
1. We recommend that DEM together with the County review current procedures and
research possibilities for new economically feasible technologies, facilities, and procedures
that would identify and prevent hazardous wastes from entering County landfills.
2. We recommend that the County establish permanent sites for ongoing collection of both
household and commercial hazardous wastes.
3. We recommend that DEM clarify the applicability of HRS chapters 342G and 342J to the
County's household hazardous waste program, and either bring the program into
compliance with statutory requirements or obtain a legal determination that compliance is
being waived by the State.
4. We recommend that DEM implement procedures for reconciliation of contractor collections
reports with shipping manifests and delivery receipts from certified reuse and disposal
facilities.
Subsequent Events
Regarding Finding No. 2 and Recommendation No. 3 above, auditors received a letter from DOH -
SWB Chief Steven Chang dated April 27, 2006, stating:
"The State currently does not have a household hazardous waste disposal program.
We understand that legislative appropriations were previously made for such a state
collection/disposal program. However, when appropriations ended around 1992, so
did the program."
This communication further supports information provided by the department during the
audit period. Therefore, auditors make no finding of non- compliance by DEM with that
portion of HRS §342G- 26(f)(3) requiring that "[t]he household hazardous wastes collected
by the counties shall be disposed of by a state program." However, given the lapse of
appropriations over the last 14 years, the State's commitment to the statutory requirements is
called into question.
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Also regarding Finding No. 2, subsequent to completion of audit fieldwork on April 25, 2006, DEM
provided copies of e-mail correspondence exchanged by County Recycling Coordinator O'Hora -Weir
and DOH -SHWB environmental engineer Sue Liu from April 21, 2006 to April 26, 2006. The e-
mails discuss and confirm DEM's re- submission and DOH's receipt of information on household
hazardous waste collections and standardization of operations, dates, times, and locations of the semi-
annual collection events beginning in 2005. Ms. Liu also confirmed receipt from EnviroServices of
an operations plan as part of its 2002 program proposal. Ms. Liu states:
"We will use this information as your required notification of your HHW
collections until the end of EnviroService's contract, as operations may change
thereafter. If they are to occur, the County shall notify us of any changes in
dates /time, location or operations during the period of EnviroServices's current
contract. In addition, notification shall be made for HHW collections after the
termination of Env iroServices's current contract."
Fiscal year 2005 -2006 is the final extension year permitted under original Contract No. 03041.
Therefore, DEM needs to initiate and complete a new IFB or RFP process to provide for
continuation of the County's household hazardous waste program. The department had not
initiated the procurement process as of the date of auditors' completion of fieldwork.
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Chapter 3 WEST HAWAII MATERIAL RECOVERY FACILITY
WEST HAWAII MATERIAL RECOVERY FACILITY
Statutory Authority
The contract for a West Hawaii Regional Material Recovery Facility, Phase I Design, Permitting and
Construction Support Services, was procured under a Professional Services Award, pursuant to
Hawaii Revised Statutes (HRS) Section 10313-304. Prior to the beginning of each fiscal year, the
head of each purchasing agency is required to publish a notice inviting submissions of qualifications.
A designated review committee evaluates all submissions and prepares a list of qualified vendors.
When a purchasing agency requires a particular professional service, the purchasing chief designates
a selection committee with education, training, and licenses or credentials in the service area. The
selection committee evaluates the list and ranks a minimum of three vendors. The ranked list is then
submitted to the purchasing agency for contract negotiation.
Audit Narrative
The Contract for the West Hawaii Regional Material Recovery Facility, Phase I Design, Permitting
and Construction Support Services, to be located at the West Hawaii Landfill at Pu`uanahulu
encompassed four components: a Compost Facility, a Salvage Facility, an Abandoned Vehicle
Impound Facility, and an Equipment Staging Area.
• The scope of work for design of the Compost Facility included infrastructure capable of receiving
FOGS (fats, used cooking oil, grease -traps waste) and receiving and processing green waste and
biosolids, and preparation of construction level plans, specifications and other necessary
documents to support design. The facility size requirement was a minimum 10 acres to include
infrastructure and utilities necessary to support office and maintenance areas and an
approximately one -acre composting area (including receiving bays for biosolids and FOGS, a pre-
mix and mixing area, an aerated static pile area with supporting negative pressure piping system,
a leachate control system, and perimeter buffer areas), a curing area, a final screening and
finished product stockpile area, and a green waste grinding and composting area. Green waste
would originate from West Hawaii, and biosolids and FOGS would be generated island -wide.
Estimated quantities were as follows: Green waste — 8,000 - 15,000 tons per year; Biosolids —
1,000 tons per year; Grease Trap Waste — 4,000 -5,000 tons per year; and Used Cooking Oil —
800 -1,000 tons per year.
• The scope of work for design of the Salvage Facility included infrastructure capable of receiving,
processing and baling vehicles, white goods and scrap metal for recycling, and preparation of
construction level plans, specifications and other necessary documents to support the design.
Design requirements included all infrastructure and utilities necessary to support receiving,
storage and processing of waste vehicles, white goods, tires, lead -acid batteries, and
uncontaminated scrap metal. Waste materials would originate from West Hawaii. Estimated
quantities were as follows: Automobiles — 1,000 units per year; White Goods — 500 units per
year; Used Tires — 5,000 units per year; Lead -Acid Batteries — 1,000 units per year; and Scrap
Metal — 5,000 units per year.
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3 WEST HAWAII MATERIAL RECOVERY FACILITY
• The scope of work for design of the Abandoned Vehicle Impound Facility included infrastructure
capable of temporary storage of abandoned vehicles, and preparation of construction level plans,
specifications and other necessary documents to support the design. Design requirements
included all infrastructure necessary to support the temporary vehicle storage area and secure the
facility and its contents to prevent theft and vandalism.
The scope of work for design of the Equipment Staging Area included infrastructure capable of
temporary storage of roll -off bins, truck tractors, trailers and other materials recovery support
equipment, and preparation of construction level plans, specifications and other necessary
documents to support the design. Design requirements included all infrastructure necessary to
support the temporary equipment storage area and secure the facility and its contents to prevent
theft and vandalism.
Procurement documentation in the program file included a summary of qualifications, a procurement
of professional services checklist, three evaluation sheets, a screening committee summary, and the
Department of Environmental Management (DEM) Director's evaluation sheet. The checklist listed
the Solid Waste Division Chief, the Recycling Coordinator, and an Engineer V from the Wastewater
Division as members of the screening committee. Of the top three environmental planning
consultants on the County's list of professional services contractors, the screening committee ranked
DR Associates first. DR Associates was also recommended by DEM Director Barbara Bell. The
committee's recommendation was submitted to the County Purchasing Agent, who awarded Contract
No. 0360 dated June 30, 2005, to DR Associates, in the amount of $120,000, to be completed within
245 days.
Exhibit A to the subject contract contained the following project timeline for tracking and monitoring
of the Consultant's performance:
1. Initial Consultant Meeting: no later that July 31, 2005.
Audit Update: Kick -Off Meeting minutes dated August 23, 2005, indicate 12
people in attendance.
2. Prepare Technical Memorandum and Preliminary Layout: no later that August 31, 2005.
Audit Update: An undated copy of the Technical Memorandum and Preliminary
Layout was observed in the program file.
3. Prepare 60% Draft Plans & Specifications: no later than October 31, 2005.
Audit Update: No plans were observed in the program file.
4. Prepare 90% Plans & Specifications: no later than thirty days after receipt of review
comments from building permit agencies, vendors, and County.
Audit Update: No plans were observed in the program file.
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Chapter 3 WEST HAWAII MATERIAL RECOVERY FACILITY
Prepare Final Plans & Specifications: no later than thirty days after receipt of County
comments.
Audit Update: No plans were observed in the program file.
6. Prepare DOH Solid Waste Management Permit Applications: no later that October 31,
2005.
Audit Update: No documentation pertaining to any DOH -Solid Waste Management
Permit application was observed in the program file.
7. Prepare Stormwater Permit Applications: no later than thirty days after completion of
Final Plans and Specifications.
Audit Update: No documentation pertaining to any Stormwater Permit
application was noted in the program file.
DR Associates itemized invoices by project component, referring to the Compost Facility as Task 1,
the Salvage Facility as Task 2, the Abandoned Vehicle Impound Facility as Task 3, and the
Equipment Staging Area as Task 4. Within each invoice, the contractor further itemized each task by
number of hours spent, dollar amount billed, and percentage of task completed. As of Invoice No. 4
dated December 2, 2005, Task I (the Compost Facility) was listed as 66.67% complete, Task 2 (the
Salvage Facility) as 91.67% complete, Task 3 (the Abandoned Vehicle Impound Facility) as 12%
complete, and Task 4 (the Equipment Staging Area) as not having commenced. The total amount
billed was $26,443.55. All documents in the program file were dated between June 2005 till
December 2005, and no documents were dated thereafter. The subject contract is still ongoing and
has not been completed.
Findings
1. Proper documentation for procurement of this contract was contained in the program file.
There appeared to be no irregularities with this procurement of professional services. The
contract commenced on June 30, 2005, during the audit period, and is still open and ongoing.
2. A deficiency was noted on County of Hawaii Certification of Compliance (SPO Form -22)
referencing Hawaii Administrative Rule §3 -122 -112, providing the contractor "maintains a
Certificate of Good Standing from the Department of Commerce and Consumer Affairs (DCCA),
Business Registration Division." That provision was lined out and initialed, the form was signed,
and a title description of "Sole Proprietor" was written on the form. However, no explanation or
authorization was provided as to why this deletion was made.
However, Contract No. 0360 in its "Special Provisions ", item no. 30, subsection "Requirement
for award ", provides in pertinent part: "As evidence of compliance, Offeror shall submit a
`certificate of good standing' issued by the Department of Commerce and Consumer Affairs
Business Registration Division (BREG). A Hawaii business that is a sole proprietorship,
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3 WEST HAWAII MATERIAL RECOVERY FACILITY
however, is not required to register with the BREG, and therefore not required to submit the
certificate. An Offeror's status as sole proprietor or other business entity and its business street
address indicated on the Offer Form OF -1 will be used to confirm that the Offeror is a Hawaii
business."
3. A discrepancy was noted on supporting documentation detailing scope of work. Contract
No. 0360, in its Exhibit A, "Scope of Work," contained a seven -stage project timeline that was
used to track and monitor the Consultant's performance. As discussed above, progress as to
Stages One and Two was documented in the program file. However, progress as to Stages Three
through Seven was not documented, with the exception of Consultant's Invoice No. 4 dated
December 2, 2005, itemizing percentages of completion for each of the four project components.
Recommendations
1. We recommend that DEM retain in its program file any and all documentation pertaining
to changes noted on any County form or contract. Should any Contractor or Consultant mark
or change any County form, documentation and authorization needs to be provided.
2. We recommend that DEM require a Contractor or Consultant to comply with contractual
timelines for submittal of required plans and applications and should document said
compliance in the program file. The program file should also include complete copies of
submitted plans and applications, any agency continents and approvals generated after plan and
application review, and any responsive communications or revised plans and applications
submitted by the Contractor or Consultant.
3. We recommend that DEM assign specific personnel to track and monitor a Contractor's or
Consultant's performance and compliance with contractual requirements prior to payment
of any invoices for services. DEM should not accept invoices that do not document scope of
work completed within contractual timelines. It is further recommended that a checklist of
project tasks and timelines be attached to the front of each contract or program file to facilitate
monitoring by department staff.
83
Chapter 3 TIRE RECYCLING PROGRAM
TIRE RECYCLING PROGRAM
Statutory Authority
Hawaii Revised Statutes (HRS) section 342G- 25(b)(5) requires that the County's Integrated Solid
Waste Management Plan include "a special waste component," and HRS §342G -26(e) includes
"tires" as one type of "special waste ".
HRS §3421 -22, "Motor vehicle tires; disposal in landfill or municipal solid waste incinerator
prohibited," provides:
"(a) No person shall place a whole motor vehicle tire in mixed municipal solid waste,
or shall discard or otherwise dispose of a motor vehicle tire except by delivery to
any motor vehicle tire retailer, tire wholesaler, or to an authorized tire collection
or authorized tire recycler.
(b) No motor vehicle tire retailer shall dispose of a motor vehicle tire except by
delivery to the agent of a motor vehicle tire wholesaler or to a motor vehicle tire
manufacturer, or to an authorized motor vehicle tire recycler.
(c) Each tire improperly disposed of shall constitute a separate offense.
(d) For each violation of this section a violator shall be subject to the penalties and
remedies provided under sections 342H -9 Penalties; 342H -10 Administrative
penalties; and 342H -11 Injunctive Relief.
(e) Variances to these provisions may be granted by the director based on written
requests submitted by a permitted disposal facility."
HRS §342I -26 establishes registration and recordkeeping requirements for all facilities that accept
used tires, including, but not limited to, tire retailers, wholesalers, transporters, collectors, and
recyclers.
HRS §342I -27 establishes the authority to levy a surcharge on all motor vehicle tires imported to the
State after September 30, 2000, and before January 1, 2006.
HRS §342I -29 provides that surcharge revenues may be used to: 1) support permitting, monitoring
and enforcement activities, including personnel costs related to used tire management, collection,
recycling, and disposal facilities; 2) promote improved market development and reuse opportunities
for recovered motor vehicle tires; 3) promote tire recovery, recycling, and reuse through education,
research and demonstration projects; 4) implement the surcharge program; 5) support programs to
prevent illegal dumping; and 6) clean up improper tire disposal sites, including conducting related
environmental assessments and remediation."
Hawaii Administrative Rules §11- 58.1 -65(c) bans all motor vehicle tires from permitted disposal
facilities after June 30, 1994, and further requires facility operators to develop plans to implement the
ban.
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While HRS §3421 -22(a) creates some ambiguity through the use of the term "whole motor vehicle
tire" as opposed to "cut or quartered tires," Recycling Coordinator Eileen O'Hora -Weir indicated that
through various verbal communications, the State Department of Health (DOH) has clearly
communicated its intent to ban all used tires, whole or cut, from municipal landfills and its concern
over the lack of evidence from Hawaii County about its efforts to implement a complete ban.
Auditors reviewed the operations plans for the Hilo and Kona landfills that were in effect for the
audit period. The Hilo plan dated March 16, 1994, addresses the ban and non - acceptance of "whole"
tires at Appendix C, paragraph 3.3.8. The Kona operations manual dated September 10, 1993, does
not specifically address procedures regarding identification and rejection of tires.
Audit Narrative
IFB No. 2073 — Contract No. 4076
Invitation- far -Bid (IFB) No. 2073 was published April 9, 2003, for removal, cutting and disposal of
vehicle tires rejected at the Hilo and Kona landfills or removed from abandoned vehicles at the Hilo
and Kona sites. Addendum No. 1 issued April 17, 2003, provided that preference be given to
proposals to divert used tires from Hawaii landfills over proposals to cut and landfill them. The
preference included a per ton price reduction of $65 and a 20 percent preference reduction.
The County received three responsive bids. A handwritten note was included in the Department of
Environmental Management (DEM) program file indicating that Hawaii Metal Recycling dba Big
Island Recycling (HMR) telephoned to acknowledge receipt of Addendum No. 1, but indicated that it
would not be amending its original bid. No written confirmation from HMR on this matter was
observed in the program file.
Of the three bids documented in the program file, HMR's bid to cut and landfill used tires was the
lowest before application of the aforementioned preference reductions. Big Island Scrap Metal
(BISM) was the only bidder proposing to divert and recycle used tires, and after application of
preference reductions, its bid was the lowest. The DEM program file did not include documentation
as to a "priority list" of responsible bidders, even though IFB No. 2073 stated that "recycle /reuse was
preferred" but was not required.
Based on documentation included in the DEM program file, it appears that further discussion was
only conducted with BISM, with a final award to BISM of Contract No. 4076 on November 10, 2003.
The contract term was from November 10, 2003 to November 9, 2004, with payment terms of $240
per ton and a maximum payout of $120,000, and the possibility of five one -year extensions. The
contract prohibited co- mingling of used tires accepted from "other" sources.
The foregoing procurement appears to have been in compliance with State and County procurement
laws, with the only possible issues being better documentation of bidder responses to contract
addenda and development of a "priority list" of responsible bidders or written determination that such
a list was not required.
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During the contract period November 10, 2003 to November 9, 2004, BISM stockpiled all tires it
collected while awaiting required permits and approvals related to the manufacture, storage, and use
of cement encased tire blocks for reuse in construction projects. By correspondence to the contractor
dated September 24, 2004, DEM declined to renew BISM's contract due to its failure to obtain
required permits and approvals and to process collected tires. By letter to Mayor Kim dated
September 28, 2004, BISM objected to DEM's decision not to renew its original contract. However,
Item No. 10 of IFB No. 2073 provides:
"Contractors may offer to continue services as specified for up to five additional
twelve (12) month periods. Assuming satisfactory performance, it is the intention of
the County to renew the price -term agreement to fulfill future needs. Contractors need
not provide such a quote, and should they elect not to, the lack of any option year
quote will not be a consideration in making an award. The County shall retain the
right to call for new bids at the end of the original contract year or any option year,
regardless of what may or may not have been provided for in any option year(s) in the
original bid."
Therefore, it appears reasonable that DEM did not renew this particular contract.
Pursuant to 1 AR §3- 122 -3, the Purchasing Division did extend BISM's contract for 90 days from
November 9, 2004 to February 7, 2005, to allow time for a new IFB process. In a follow up letter to
BISM dated November 24, 2004, the Purchasing Division required that all invoices include only tires
processed up to February 7, 2005, and that all invoices be submitted to DEM within 30 days of the
February 7, 2005 contract expiration date. BISM's invoice dated June 14, 2005, for baling and
shipping of 168.34 tons of tires to a mainland crumber, was subsequently paid by the County. No
documentation was found in either DEM or Purchasing Division files regarding the decision to
process the BISM invoice which was submitted more than four months after the contract expiration
date.
IFB No. 2160 — Contract No. 000506
New IFB No. 2160 issued December 10, 2004, was opened on January 5, 2005. BISM was the sole
bidder. The County negotiated a new contract with BISM, awarding new Contract No. 000506 dated
February 6, 2006, for the contract term January 2006 through December 2006, at a rate of $360 per
ton and allowing up to six annual extensions. It should be noted that had DEM extended BISM's
original Contract No. 4076, the previously negotiated 2006 rate would have been $260 per ton.
Recycling Coordinator O'Hora -Weir advises that the lack of response to IFB No. 2160 was due to
larger processors not being interested in the low volume of used tires involved. She indicated that
used tires are normally included as a part of a contract for scrap metal recycling. However, since
BISM is the contractor for both the County's scrap metal and used tire recycling programs, it is
unclear why DEM did not extend BISM's original tire reuse contract until such time that BISM's
scrap metal recycling contract was due for rebid, and incorporate tire reuse as a part of a new
combined IFB.
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It is also unclear why DEM did not provide IFB information to another bidder whose interest is
discussed in communications found in the Used Tire Recycling program file:
An e-mail from DEM secretary Sharon Henry to Recycling Coordinator O'Hora -Weir dated
August 23, 2004, with a handwritten note from Solid Waste Division Chief Lono Tyson to
Ms. O'Hora -Weir states: "Unitek is vv interested in bidding tire contract. Unitek currently
has several big island contracts for tire recycling, CostCo -Car Rental Cos... ". The e -mail
states that Ms. O'Hora -Weir cannot find contact information for Unitek and requests the same
from DEM Director Bell.
An e-mail from DEM Director Bell to Purchasing Agent Bill Gray dated January 3, 2005,
states: "I'm curious, was a bid mailed to Unitek? They had expressed interest for this bid
previously." Mr. Gray's response includes: "No record of sending to Unitek — my 11130
memo requested names of any interested parties, but none were forthcoming. Do you have an
address or contact name /number ?"
DOH Permits
In June 2005, BISM applied to the State Department of Health (DOH) for permit modifications to
allow for tire baling and increased storage capacities. DOH issued modified permits in September
2005. However, while the modified permits increased storage capacities, they did not allow increases
to levels requested by BISM. It should also be noted that BISM did not obtain required DOH permits
and approvals for the manufacture, storage, and reuse of cement encased tire blocks until issuance of
a "pilot project" permit for production of 60 tire blocks during the 2006 -2007 fiscal year.
DEM's program file contains documentation of its communications to BISM regarding: 1) the
necessity and requirements for approval of production and use of concrete encased tire blocks, 2)
DOH permit capacity limitations for tire baling and storage at both the Kona and Hilo landfill sites
and reiterating the necessity for compliance, and 3) a request that stockpiled tires be shipped to a
permitted tire recycler for crumbing. It appears from the program file that DEM was diligent in its
attempt to administer and manage BISM's contract in compliance with regulatory requirements and
program intent.
On March 13, 2006, DEM Director Bell, Solid Waste Division (SWD) Chief Mike Dworsky, and
Recycling Coordinator O'Hora -Weir advised auditors that the County and BISM are currently in
compliance with all DOH permitting requirements with the exception of inventory/storage quantities.
DEM anticipates that inventory/storage quantities will also be brought into compliance by the end of
fiscal year 2005 -2006, as the contractor is procuring a second baling machine and has obtained the
aforementioned "pilot project" permit for its concrete block encasement project.
In several communications dated after the audit period, DOH notified DEM and BISM of potential
violations of solid waste management permits for the Hilo and Kona sites. Specifically, in
communications dated January 4, 2006 and January 6, 2006, DOH cites violations relating to quantity
of tires and storage of tires outside of designated containers at both sites.
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Public Complaint
Observed in the program file was documentation of DEM's follow up on an "Information and
Complaint Request for Investigation and Service Report" form dated March 22, 2004, filed by
Donald Leopoldino of Leo's Rubbish. The complaint form indicates that Mr. Leopoldino followed a
truck into the Hilo transfer station on the morning of March 22, 2004, and witnessed it going into the
BISM processing yard and dumping a load of whole tires. Mr. Leopoldino stated that he questioned
the security guard on duty and was told by the guard that he had been instructed by the County to
direct the public to dump tires in the area used by BISM. A memo in the program file indicates that
Recycling Coordinator O'Hora -Weir called BISM's Mike Allen to follow up on the complaint.
When Mr. Allen inquired of employees, and was told that no one had seen or accepted any tires, he
stated that he would check if tires had been illegally dumped in an area other than the tire processing
area. Ms. O'Hora -Weir adds that she asked former SWD Chief Lono Tyson to research whether
County personnel had, in fact, misinformed the security guard. A memo from Mr. Tyson to SWD
personnel and transfer station security guards dated March 23, 2004, entitled "County of Hawaii used
tire contract clarification," instructed that BISM accept only used tires delivered by County SWD
personnel and that the public was not to drop off used tires at any salvage or solid waste management
facility. Mr. Tyson's memo also set forth DEM policy for dealing with the public with regard to
disposal of used tires and County reporting requirements for acceptance of used tires. Since the
"follow -up" section of the complaint form was left blank, it is unclear whether County personnel had
disseminated incorrect information and/or whether the load of tires had been located. However, the
form does indicate that Ms. O'Hora -Weir met to discuss the complaint with Mr. Leopoldino on
March 25, 2004, and that he was given a copy of the form.
Findines
1. The County's Updated Integrated Solid Waste Management Plan and DEM's landfill
operations manuals do not address "banned waste" in accordance with State statutes and
administrative rules.
The only used tires currently addressed in the County's tire recycling program are whole tires
removed from County landfills and tires removed from dismantled vehicles through the scrap
metal program. Recycling Coordinator O'Hora -Weir informed auditors that the disposal of a
majority of used tires is conducted by and through tire retailers, most of whom contract with
private rubbish haulers who continue to cut and landfill them. She indicates that various large
volume tire recyclers have indicated that they have not responded to County IFBs for its tire
recycling program because of the small volume of whole tires involved, but that when the County
implements a total ban from landfills of used tires, cut and whole, they would be interested in
establishing a presence on the Big Island.
2. DEM's program files are incomplete as to procurement documentation.
No documentation can be found in the DEM program file that a "priority list" of responsible
bidders for IFB No. 2073 was developed, or that the list was referred to when problems arose in
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negotiations with BISM. It also appears from the program file that at least one potential bidder
was not supplied with the IFB packet.
3. DEM did not timely respond to Purchasing Division requests for the "Award
Recommendation" and the "Renew Rebid" for IFB No. 2073.
A minimum of four written notices each were sent to the department from Purchasing.
4. Available documentation indicates that DEM acted properly regarding the following:
+ Amending IFB No. 2073 to give preference to a recycle /reuse proposal.
+ Attempting to support BISM's proposed "new" recycle market development project.
5. DEM's decision not to renew the original BISM contract was in compliance with contract
terms.
The contractor had not met specific performance requirements set out in IFB No. 2073 and
Contract No. 4076, and the County had retained its right to call for new bids at the end of the
original contract year or any option year.
6. DEM's procedures for notifications to contractors of its "intent not to extend" are
inadequate.
While DEM was within its contractual rights not to renew Contract No. 4076, its notification of
non - renewal to BISM was limited to one line at the end of an e-mail dated August 9, 2004,
regarding permit compliance and year end reporting. Due to the contractual requirement for 90
days notice, a written communication from DEM on County letterhead should have been sent to
the contractor, together with some method of return- receipt confirmation.
7. DEM's issuance of a new contract rather than renewal of its original contract with BISM
may not have been cost effective.
+ Consideration should have been given to:
o Retaining the lower 2006 per ton rate under BISM's original contract.
o Allowing the coupling of BISM's tire recycling and scrap metal contracts.
o Researching possible program changes to attract additional bidders.
S. Contractor's certificates of insurance were in error.
The certificates of insurance submitted by BISM list the "County of Hawaii, Purchasing
Department" as the additional insured rather than the "Department of Environmental
Management ".
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9. DEM did not implement sufficient controls to ensure that only tires allowable under
contract were included in weights billed to the County.
Auditors noted a written communication from DEM to BISM prior to contract issuance,
requesting submission of the contractor's plan for segregation of program tires from non - program
tires. BISM responded that it was aware of the need for segregation but had no idea how to
control it, and requested input from the County. There is no documentation in the program file of
any recommendations from the County, or any controls being implemented by the contractor.
10. DEM's internal accounting procedures are inadequate.
Funds in the amount of $79,598.40 continue to be encumbered for Contract No. 4076 though it
had been terminated in November 2004, and a new contract had been issued to the same vendor
for the same program. In discussion with DEM Accountant Robin Bauman, there is no formal
internal procedure for authorizing the liquidation of an encumbered balance of a closed contract.
Ms. Bauman indicates that the Recycle and Diversion Group continues to use the Partial Delivery
Receiving Report (PDRR) form though it is no longer a required document. She further
communicated her understanding that the Finance Department is working on developing a report
utilizing the County's FRESH accounting system to show outstanding encumbrances in order to
facilitate departmental review and update of contract accounts.
11. DEM's monitoring and verification of shipping manifests with end - recycler receipts are in
place and adequate.
12. DEM does not maintain sufficient documentation of potential contractor issues and
violations or the subsequent corrective actions and resolutions of said issues and violations.
13. DEM does not provide transfer station personnel with adequate training and written
policies and procedures related to site operations.
14. DEM was very timely in its investigation and follow up on a public complaint about possible
program violations.
15. The State may not be in strict compliance with statutory provisions regarding its use of the
Environmental Management Special Fund for tire reuse programs.
• HRS §3421 -29(2) provides that the Special Fund shall be used to promote improved market
development and reuse opportunities for recovered motor vehicle tires.
• HRS §3421 -29(3) provides that the Special Fund shall be used to promote tire recovery,
recycling, and reuse through education, research, and demonstration projects.
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Recommendations
1. We recommend that the County Code, Updated ISWMP, and DEM landfill operations
manuals be reviewed and further updated to be consistent with the State ban of used tires
from County landfills.
2. We recommend that DEM implement a process to ensure that all interested parties are
included in the IFB process to ensure strict adherence with procurement laws and to enable
the County to contract for quality services at reasonable prices.
3. We recommend that the Purchasing Division and DEM determine whether file
documentation can be improved to develop a priority list for procurements.
4. We recommend that DEM implement formal policies and procedures for program review
and contractor evaluation to better determine whether a current contract should be
extended or a new procurement process should be initiated:
• Including a cost/benefit analysis of contract extension versus new procurement.
• Allowing sufficient time for a proper competitive procurement process.
• Providing for timely execution of a contract extension or issuance of a notice of procurement.
• Providing internal and external procedures and forms for documentation, authorization, and
communication of contract awards.
S. We recommend that DEM determine why timeliness in its procurement is problematic and
implement appropriate countermeasures to ensure that:
• Responses to written requests from the Purchasing Division regarding procurements, contract
awards, and contract extensions are communicated in a timely manner.
• Procurements are initiated and completed in a timely manner.
• Contracts are awarded in timely manner.
6. We recommend that DEM develop formal procedures and forms for authorization of
contract- related changes such as account balance liquidation.
7. We recommend that DEM review documentation submitted by contractors for compliance
with contractual and regulatory permit requirements.
8. We recommend that DEM develop policies and procedures pertaining program incident
resolution and reporting.
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9. We recommend that DEM provide staff with clearly defined job responsibilities and
adequate training and policy guidance regarding transfer station operations and
contractor monitoring duties.
10. We recommend that DEM implement the changes necessary to provide the capability to
obtain accurate estimates of volumes to be processed for inclusion in procurement and
contract documents.
11. We recommend that DEM implement a mechanism for ongoing measurement of inflow
volumes.
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EPA GRANTS
PHASE I: KEA'AU RECYCLING AND REUSE CENTER (KRRC)
Statutory Authority
In 2002, Environmental Protection Agency Western Region IX (EPA) allocated federal funds to
develop an educational, planning, and pilot reuse center project. The grant was regulated under the
EPA Resource Conservation and Recovery Act (RCRA) of 1976, the Office of Management and
Budget (OMB) Circular A -102, "Grants and Cooperative Agreements with State and Local
Governments," and the Code of Federal Regulations (CFR), Title 40 - Part 31, "Uniform
Administrative Requirements for Grants and Cooperative Agreements to State and Local
Governments."
On the State level, any procurement process under this grant must comply with Hawaii Revised
Statutes (HRS) Chapter 103D, "Hawai`i Public Procurement Code ", and Hawaii Administrative
Rules (HAR), Title 3, Subtitle 11, "Procurement Policy Board," Chapter 122, "Source Selection and
Contract Formation."
On the County level, this procurement was exempt under Hawaii County Code, Section 2 -141,
"Applicability to noncounty funds; cosponsored activities," which provides: "Nothing in this article
shall be construed to apply to the appropriation of funds: (1) Provided to the County for a stated
purpose by any person, private entity, or government entity; or (2) Made to an agency for any activity
or program co- sponsored by the agency and a private or government entity or entities."
Audit Narrative
According to DEM project file documentation, early in his administration on or about January 2001,
Mayor Harry Kim met with the Hawaii Island Economic Development Board (HIEDB), a 501(c)3
non - profit networking business organization, and told the group that waste management and
recycling were among his top priorities. HIEDB's stated mission is to provide and promote private
sector support and expertise for balanced economic growth in Hawaii County, in partnership with
federal, State, County, and private resources. By informal agreement between Mayor Kim and
HIEDB, an effort was initiated to pursue public and private partnerships among business, labor, and
community leaders, environmental advocates, and the recycling industry to develop a waste
management plan. A small ad hoc planning group was organized consisting of County departmental
staff and business leaders in the Hilo community. Monthly meetings were held to develop a general
strategy and feasibility plan, an inventory of resources, and a project plan. A request was made by
the group to U.S. Senator Daniel Inouye in March 2001 to consider a pilot project for fiscal year
2001 -2002, and congressional legislative language was drafted in May 2001.
In the course of discussions with the auditors, Timonie Hood, EPA Green Building Coordinator for
Region 9 indicated that congressional language for the grant was drafted with the intent that the
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project be a joint collaboration between the County and HIEDB. She further indicated that the actual
grant was issued solely to the County as it made it much easier for the EPA from a legal and
administrative standpoint.
Contract No. 3051
In early 2002, the County applied to the EPA, and on March 7, 2002, was awarded Grant ID No. X-
97917701-1 in the amount of $400,000. The grant was to be used to establish and implement a
community development model for renewable resource management by upgrading solid waste
transfer stations into community recycling centers.
On September 30, 2002, the County entered into a Memorandum of Agreement (MOA) and Contract
No. 3051 with HIEDB for management of a pilot project at the Kea`au Refuse Transfer Station, later
named the Kea` au Recycling and Reuse Center (KRRC).
On January 18, 2003, after conducting two cycles of procurement, the first of which attracted no
responsive bidders, HIEDB entered into an Agreement with Recycle Hawaii (RH), a 501(c)3 non-
profit educational organization, to operate a recycling and reuse demonstration process at KRRC.
RH's stated mission is to promote resource awareness and recycling on the Island of Hawaii through
education and information about environmentally sound resource management and recycling
opportunities for a more sustainable future. The term of the agreement was for 12 months from
January 18, 2003 to January 29, 2004, in the amount of $224,000.
On March 8, 2003, RH entered into an Agreement with HMP, Inc. dba Business Services Hawaii
(BSH), a for -profit corporation, to provide roll -off containers at KRRC for collection of recyclable
materials and to haul materials to end market recyclers. The collected and recycled materials
included aluminum, glass, scrap metal, mixed and white paper, magazines, books, cardboard, green
waste, and plastics #1 and 42. The term of the agreement was for nine months from March 29, 2003
to December 31, 2003, in the amount of $53,450. Subsequently, a second agreement between RH
and BSH for continuation of services was entered into on March 2, 2004, for the six -month period
from January 1, 2004 to June 30, 2004, in the amount of $16,048. A third and final agreement
between RH and BSH to continue services was entered into on July 1, 2004, for a one -year term from
July 1, 2004 to June 30, 2005, in an amount up to $62,667.84 (which figure was based on the per ton
reimbursement for end market recycling of the various materials collected).
On July 21, 2003, HIEDB entered into a Supplemental Agreement with the Rural Community
Assistance Corporation (RCAC), a non -profit 501(c)3 organization, to provide strategic planning at
KRRC. RCAC's stated mission is to assist rural communities in achieving their goals and visions by
providing training, technical assistance and access to resources. RCAC also offers meeting and
conference planning assistance from site selection, contract negotiation, budget development,
catering, special event coordination, and preparation of marketing and registration materials. RCAC
was specifically hired under this agreement to create a video documentary on recycling, record and
document input from community elders and kupuna in the Kea`au district, and conduct a strategic
planning workshop for the community in December 2003. The term of the agreement was for seven
months from July 21, 2003 to January 29, 2004, in the amount of $53,908.
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Chapter 3 EPA GRANTS
Contract No. 4035
On August 7, 2003, Contract No. 4035 was issued by the County to RH, to develop and implement
various recycling education and public outreach programs, -conduct public awareness activities
relating to illegal dumping, sustain and expand residential used motor oil program, and conduct other
training activities relating to waste reduction and re -use and recycling. The contract term was for the
period July 1, 2003 to June 30, 2004, in the amount of $95,000.00, of which $40,000.00 would be
charged to the Recycling Program general ledger account and $55,000.00 would be charged to the
Used Oil/Disposal -State general ledger account.
This contract was deemed exempt from State procurement laws pursuant to HAR §3- 120 -4, which
provides a list of goods and services that the Procurement Policy Board has determined to be exempt.
Included in the list of exempt services are: "Services of lecturers, speakers, trainers, and
scriptwriters; because although goods and services may be available from multiple sources, their
procurement by competitive means would be either not practicable or not advantageous to the State."
Compensation provisions in the contract required monthly invoices, detailed budget reports of
revenues and expenditures for each program, reports on program status and deliverables, and
payment of monthly invoices by the County if satisfactory progress toward program completion is
verified. Outreach program components included community events and workshops, printing and
distribution of educational materials, publication and broadcasting of media releases, evaluation of
public events, presentations and demonstrations, and continuation of a 2417 infoline and web site.
Supplementary Contract No. 1 was issued to RH on January 22, 2004, in the amount of $70,000, for
the period January 1, 2004 to June 30, 2004, to continue recycling at KRRC, expand the number of
backyard composting /vermiculture workshops, and continue public education on re -use opportunities.
Supplementary Contract No. 2 was issued to RH on July 14, 2004, in the amount of $6,205, to
provide additional public outreach and educational activities including radio and newspaper spots to
promote used oil drop -off sites, conduct on- site/hands -on educational activities to prevent used motor
oil contamination, and pursue development of additional permanent drop -off sites for recycling of
used motor oil.
State CIP No. 03 -0331
After the initial 15 -month startup period at KRRC, Request- for - Proposal (RFP) No. 2127 was
awarded to RH on May 12, 2004, for the period July 1, 2004 to June 30, 2005, in the amount of
$142,648, for continuation of services at KRRC. Funding was obtained under a State Capital
Improvement Project (CIP) No. 03 -0331. The three main contract components were recycling
opportunities, re -use options, and public education and outreach programs.
The scope of work for recycling opportunities entailed documenting all recyclable materials collected
and diverted from the South Hilo landfill, providing information on end use of each recyclable
material collected, and containerizing green waste and scrap metal to be transported to Hilo. The
recyclable materials collected were to include non - vehicle scrap metal (excluding refrigerators),
paper, newspaper, glossies, catalogs, white paper, mixed paper, cardboard fibers, glass, aluminum,
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and plastics #1 and #2. The facility was to be open to the public daily between 6:30 a.m. to 6:30 p.m.
The contractor was to be responsible for designing, constructing, and installing signage to educate the
public about proper disposal of recyclables and to direct them to specific disposal areas. The final
responsibility of the contractor was to provide for safe ingress and egress at the site, to direct traffic,
and provide parking and pedestrian walkways.
The scope of work for reuse options entailed the operation of a materials exchange facility which is
accessible daily and where the public can claim, purchase, or trade items. The contractor was to be
responsible for receiving and distributing materials for productive use and providing adequate
parking and safe traffic flow. The following materials were to be accepted: furniture, office
equipment, toys, household appliances, garden/farm items, tools, books, clothing and fabrics, and
construction material. Only materials collected and diverted from the landfill and put back into
productive use could be counted as re -use items.
The scope of work for public education and outreach entailed the preparation and dissemination of
information about recycling and reuse island -wide. The contractor was to educate the public through
signage, press releases, and advertisements, conduct workshops at the KRRC site, maintain cellular
telephone access and log telephone inquiries at the site, and maintain portable restrooms at the site for
use by the staff.
Compensation to the contractor was to be made after receipt of monthly invoices, accompanied by
reports outlining accomplishments and verification of weight tickets. Additional contract terms
provided for: daily hours of operation from 6:30 a.m. to 6:30 p.m., daily staffing from 9:00 a.m. to
5:00 p.m., and adequate installation and replacement of signage as needed. Monthly reports were to
include information on collections, events, contamination issues, site improvement activities, staff
changes, and volunteer efforts, and a record of donations and revenues. Monthly invoices were to be
submitted no later than the Wh of each month, and were to be broken down into two cost
components: costs relating to collection, handling, and transport of recyclables, and costs relating to
administration of the site operations. The collection and hauling costs were to be based on scaled
weight tickets and charged at the following rates: $0.00 per ton for aluminum; $0.00 per ton for
glass; $70.00 per ton for scrap metal; $25.00 per ton for mixed and white paper; $25.00 per ton for
magazine and glossy paper; $45.00 per ton for cardboard; $50.00 per ton for green waste; and $25.00
per ton for plastic #1 and plastic #2 as listed on the County's final price form revised June 17, 2004.
Administration costs were not to exceed $78,735 for the twelve -month contract period.
Supplementary Contract No. 1 dated May 26, 2005, in the additional amount of $24,000, was issued
for paving of the facility roadway, installation of speed bumps, and acceptance and diversion of
limited construction and demolition waste within fenced and gated areas to be installed by the
contractor. The cost for grubbing, grading, and paving of the roadway and installation of speed
bumps was not to exceed $21,000, and development of a limited construction and demolition area
was not to exceed $3,000.
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RH — Claims for Payment
Monthly contractor invoices were reviewed for the period August 2003 to May 2004. Observed were
three invoices which included the following exceptions: no verification of commodities from RH,
contractual services lacked sufficient documentation to support total invoiced amounts, and monthly
reports from RH and BSH did not reconcile with HIEDB invoices. Reconciliation of invoiced
amounts against the contractor's own detailed monthly budgets was also difficult. For example, RH
submitted its Profit and Loss and Budgeted Financial Statements, but amounts indicated were year -
to -date rather than the monthly figures being invoiced.
It appears that RH did not comply with a contractual requirement that its monthly invoices be broken
down into two components: 1) the cost of collection and hauling based on scaled weight tickets and
charged at the respective per ton rates for specific recyclable materials included on the County's final
price form revised June 17, 2004; and 2) administrative costs not to exceed $78,735, and total cost of
both components not to exceed $142,648. All invoices were paid to RH, but no itemization or
documentation of costs was submitted with contractor invoices.
While the RH program file contains documentation of public outreach and educational activities by
the contractor, it does not document the development of new permanent drop -off locations for re -use
materials as required by contract.
HIEDB — Claims for Payment
After receiving payment on invoices, HIEDB submitted revised invoices for adjusted expenses. No
explanation was noted in the program file concerning adjustments that totaled approximately
$19,000.
Possible Conflict of Interest Issues
In an undated letter, a recycler stated that even though his business was listed in the yellow pages of
the telephone book, he was never contacted by HIEDB's Community Task Force, and went on to ask:
"...how did HIEDB choose certain members for the community task force and exclude others, and
will the special interest private business task force members receive money and equipment to
compete against the recycling businesses that were excluded ?" In another undated letter, the same
recycler wrote: "... I stepped in and demanded that the County facilitate the $400,000 and that the
private businesses attending HIEDB's Community Task Force meeting be required to go through
procurement procedures, thus insuring that any person, non -profit group or private business not
attending the meetings could still participate in the program." No other comments, responses, or
resolution to these letters were found in the program isle.
Included in the program file was an e-mail from a consultant to HIEDB, commenting about the
appearance of improprieties and a conflict of interest during the award process for this grant. The e-
mail states: "... as I mentioned to you earlier, I have real concerns about Eileen O'Hora -Weir (the
former director of RH) having any contact with the EPA project during the course of the present EPA
contract. I don't believe that she can represent the County in an objective manner on this particular
grant. ... I believe the booklet (referenced below) supports my position — that Eileen, as a County
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employee, should have absolutely no contact with the current EPA grant". Attached to the e-mail
were copies of the U.S. Office of Government Ethics publication on conflicting financial interest,
impartiality in performing official duties, misuse of position, outside activities, and restriction on
former employees. No other comments, responses, or resolution to this letter was found in the
program file.
In a subsequent meeting with DEM personnel, Recycling Coordinator Eileen O'Hora -Weir explained
that she was not involved in the procurement for Phases I and II of the EPA Project. The
procurement process was handled by HIEDB for all subcontractors at the KRRC and the Kealakehe
sites. Ms. O'Hora -Weir also stated that she was removed as project manager from Phase 11 by DEM
Director Barbara Bell and replaced by DEM Deputy Director Nelson Ho.
A lower tier sub - contract was issued to a for -profit entity whose principal officer was a member of
the "ad -hoc" planning committee and also a board member of the non - profit entity which awarded the
lower tier sub - contract.
It is of utmost importance that all County actions relating to contracts, grants, and procurements not
only take into consideration the legal substance of a transaction, but that public perception be
considered as well. It is crucial that sufficient disclosure and documentation be available in the public
record to allay any concerns of wrongdoing.
Findings
1. DEM frequently issued contracts after commencement of the contract period.
2. DEM's issuance of multi - tiered contracts raises the question of whether grant monies were
efficiently expended. Specifically, a Memorandum of Agreement for project management was
issued to a non - profit entity which, in turn, issued a subcontract for that same purpose to a second
non -profit entity, which, in turn, issued a subcontract to a for -profit entity for actual operations.
Table 1.4
EPA Phase I
Years 2003 -2004
Agreement
Purpose
Award
Sub -Award
Difference
County to HIEDB
Administration
$390,000
$224,000
$112,092
HIEDB to RH
Design /install
$224,000
$53,908
$170,550
HIEDB to RCAC
Strategic Plan
$53,908
NIA
$53,908
RH to BSH
Operations
$53,450
NIA
$53,450
Total
$390,000
This raises the issue of efficient utilization of federal grant monies when outsourcing grant
administration and operations.
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Chapter 3 EPA GRANTS
3. DEM's issuance of contracts raised conflict of interest issues from other recycling
contractors and consultants.
Hawaii County Charter, Article XIV, "Code of Ethics ", Section 14 -2, "Standards," provides in
pertinent part: "It shall constitute a conflict of interest for employees or officers of the County to:
(c) "Engage in any business, transaction or activity or have a financial interest, direct or indirect,
which might reasonably tend to be incompatible with the proper discharge of their official duties
or to impair their independence of judgment in the performance of their official duties."
County's "Code of Ethics" does not address possible ethical conflicts relating to the County's
hiring of individuals formerly employed by entities with which the County currently has active
contracts, or of possible conflicts relating to sub -tier contracts issued for County projects.
4. DEM issued payments to contractors without sufficient supporting documentation for
invoiced amounts or verification of satisfactory progress toward program completion.
CFR — Title 40, Part 31, Subpart C, Subsection 31.20 — Standards for Financial Management
Systems, Item (2) — Accounting Records, also provides: "Grantees and sub - Grantees must
maintain records which adequately identifies the source and application of funds provided for
financially- assisted activities. These records must contain information pertaining to the grant or
sub -grant awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays
or expenditures, and income."
Section 2 of Contract No. 4035 also specifically provided: "Compensation, monthly invoices are
to include a detailed report of revenues and expenditures for each program and a report on the
program status and deliverables."
Recommendations
1. We recommend that the County as EPA Grant awardee monitor and review all
procurement processes and obtain sufficient documentation to provide assurance that all
procurements are made in accordance with applicable grant and procurement laws and
regulations.
2. We recommend that DEM ensure the timely procurement of its contracts and/or
agreements, so that a valid contract is issued prior to commencement of work. A
spreadsheet or other tracking method should be implemented to ensure completion of the
procurement process prior to commencement of each contract.
3. We recommend that the County consider revision of the County Code and procurement
rules relating to "conflict of interest" and "related party" issues on the part of employees,
contractors and subcontractors, which specifically addresses definitions, required
disclosures, and conditions under which such relationships are prohibited or permitted.
Chapter 3 EPA GRANTS
4. We recommend that DEM implement policies and procedures for monitoring and control of
contractor performance to ensure that contractual obligations to the County are being
fulfilled and public funds are being properly expended.
5. We recommend that DEM assign personnel to reconcile contractor claims and authorize
payment of invoices. DEM should require itemization of invoiced amounts and sufficient
supporting documentation which clearly reconciles to each itemized amount. For invoices
resubmitted for payment, careful review is needed to ensure that no double- or over - billing has
occurred.
6. We recommend that DEM include in its program file any and all documentation pertaining
to any complaints, improprieties, or discrepancies that may occur during a contract period,
including a chronology of the resolution process.
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PHASE II: KEA`AU RECYCLING AND REUSE CENTER (KRRC)
Federal Grant (EPA/County)
On September 17, 2003, the County was awarded amended EPA Grant No. X- 97917701 -1 for the
period ending October 31, 2005, in the amount of $223,500, increasing total funding from $400,000
to $623,500, with $10,000 authorized for County administrative costs. The project was to implement
a community development model for renewable resource management by upgrading County solid
waste transfer stations into community recycling centers, specifically targeting West Hawaii
facilities for expansion. Condition Nos. 1 to 12 of original EPA Grant No. X- 97917701 -0 dated June
28, 2002, were to remain in full force and effect.
Memorandum of Agreement (County/HIEDB)
On December 22, 2003, the County entered into a Memorandum of Agreement (MOA) and Contract
No. 4093 with the Hawaii Island Economic Development Board (HIEDB) to establish and develop a
community model for renewable resource management by creating community recycling centers at
the County's solid waste transfer stations no later than June 30, 2005 (or within 557 consecutive
calendar days). HIEDB was to demonstrate and document the effectiveness of this new model at the
Kealakehe transfer station or other West Hawaii transfer station through an organized, concerted
recycling effort. Among its obligations under the MOA, HIEDB was to use $213,500 of EPA grant
monies to transform the Kealakehe or other West Hawaii transfer station into a community recycling
center without disruption of service, conduct public outreach programs related to commercial and
residential recycling and reuse, and clean up and restore the transfer site upon closure of the grant
period. HIEDB was also to require all subcontractors to provide sufficient information and
supporting documentation to fulfill the terms and conditions of the grant. The County's obligations
under the MOA were to receive funds from the federal government, and if the project was successful
and funding was available, to implement the model renewable resource management plan at
additional County transfer station sites to reduce the amount of solid waste entering all County
landfills.
On May 10, 2005, the County issued Supplemental Contract No. 1 to HIEDB, for an additional
$30,000, to allow sufficient staffing and site modifications to increase the quantity of waste diverted
from County landfills at the Kealakehe transfer station (aka "Kona Recycles at Kealakehe") through
June 30, 2005. The additional $30,000 was to be funded by foregoing the $10,000 earmarked to
cover the County's administration costs and by appropriating an additional $20,000 from Recycling
Program funds instead of EPA grant monies under the discretion of the Department of Environmental
Management (DEM). Of the $30,000, no more that 10 percent was to have been expended on
administrative expenses incurred by HIEDB, with the balance of funds to be expended on operational
costs incurred by lower tier sub - contractor BSH.
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Chapter 3 EPA GRANTS
Operations Agreement (HIEDB/BSH)
On August 19, 2004, HIEDB entered into an Operations Agreement sub -tier contract with HMP dba
Business Services Hawaii (BSH), in the amount of $128,000, for the period August 1, 2004 to June
30, 2005, to transform a designated area in proximity of the existing Kealakehe Solid Waste Transfer
Station into a community recycling center and promote it to the public. The Operations Agreement
required monthly reports to HIEDB on the following project components: site preparation and design
in accordance with a plan approved by HIEDB and the County; furnishing of a temporary shelter to
be used for public education, displays and to protect site users and sensitive materials from inclement
weather; maintenance of records related to collection and processing activities with the understanding
that materials collected would not be eligible for diversion grant payments from the County; and
maintenance of complete and accurate records on types and quantities by weight of recyclable
materials collected and their ultimate disposition including details of any products created from the
recycled materials.
On May 24, 2005, HIEDB issued Supplemental Contract No. 1 to BSH, in the amount of $27,000, to
allow sufficient staffing and site modifications necessary to increase the quantity of waste diverted
from the Kealakehe landfill. The contract also allowed invoicing of up to $13,500 for May and June
2005 for this specific purpose.
Education and Public Awareness Agreement (HIEDB/RH)
On September 27, 2004, HIEDB entered into a separate Education and Public Awareness Agreement
sub -tier contract with Recycle Hawaii (RH), for the period September 27, 2004 to June 30, 2005, in
the amount of $27,000, to promote the community recycling center located in proximity of the
existing Kealakehe Solid Waste Transfer Station. Among its obligations under the agreement, RH
was to provide press releases to newspapers and radio stations servicing Hawaii Island; provide a
RH website to disseminate detailed information for the pilot project to the public; plan and conduct at
least nine workshops during the nine -month period demonstrating use of recyclable and reusable
materials; design and administer a survey to businesses in West Hawaii to provide a baseline for
current recycling and reuse practices and identify recycling and reuse services that businesses would
like to access; produce a workbook that may be used by commercial businesses, residents and the
visitor industry to internally audit their waste management practices and identify areas of operation
where recycling /reuse activities can be increased; and plan and conduct traffic counts at the project
site during the first and last months of operation to track participation at the center.
DOH Permit Violations
The State Department of Health (DOH) conducted site inspections at 14 selected County
Convenience Centers (aka transfer stations) from February 2, 2005 to February 4, 2005 and
communicated site inspection and permit requirements in a letter to DEM dated March 7, 2005.
Regarding the Kailua (Kealakehe) Convenience Center, Solid Waste Management (SWM) Permit
No. CC- 0024 -02, DOH reviewed information provided in the "Kealakehe Operational Plan,"
"Kealakehe Recycling Center Site Plan," and County correspondence dated October 7, 2004,
requesting the use of tax map key parcel 7- 4- 020:007 for the recycling activity.
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3 EPA GRANTS
SWM Permit No CC- 0024 -02 had been issued by DOH for tax map key parcel 7- 4- 20:0016 where
waste transfer operations were located. DOH informed the County that a solid waste permit was
required for the recycling activity and provided a permit application via facsimile and mail on
December 29, 2004. The completed permit application, including filing fee, needed to be submitted
within 30 days of receipt. The County was advised that the ongoing unpermitted recycling activity
violated HRS §342H -30(b) and HAR §11- 58.1 -04 and was subject to enforcement actions under HRS
§342H -7 and penalties under HRS §342H -9. The County was further advised that it could be subject
to formal enforcement action and issuance of penalties of up to $10,000.00 per day per violation.
The DEM program file did not contain any further response or correspondence regarding this issue
from the County, HIEDB or BSH. At its February 3, 2005 inspection, DOH observed that four 30-
cubic yard open roll -off containers and one 30 -cubic yard compactor from BSH for collecting and
storing recyclable materials were located in an area across from the access road to the convenience
center and that recycling activity was not located within the permitted parcel. DOH's determination
was that the recycling activity which had commenced on November 1, 2004, was actually located on
tax map key parcel 7- 4- 020:021.
In a subsequent letter to DEM dated May 5, 2005, DOH stated that the County's permit -by -rule
application for the recycling drop -off facility located on tax map key parcel 7- 4- 020:021 had been
received on April 18, 2005, and a revised operation and layout plan had been received on April 26,
2005. DOH indicated that it would review and respond to the application in a separate letter.
Subsequently, in its letter to DEM dated September 2, 2005, DOH approved the County's new
general permit application received on July 19, 2005, to accept and process collected recyclabies at
the subject site, and enclosed SWM Permit No. RY- 0039 -05 for "Kona Recycles at the Kealakehe
Recycling Center" which superseded Permit -by -Rule No. RY- 0012 -05 received by the County on
April 20, 2005.
Since program file documentation did not provide sufficient information to clarify the circumstances
that necessitated a "general permit," the audit team inquired further of DEM Recycling Coordinator
Eileen O'Hora -Weir who indicated:
• The original permit -by -rule application contained the wrong TMK parcel number due to a
typographical error; and
• A general permit application was required when DEM concluded that it would be more
efficient to bale collected cardboard on -site which is not permissible under a permit -by -rule.
Other Issues
Title 2 of the Code of Federal Regulations (CFR) Part C § 215.41, "Recipient responsibilities,"
provides in pertinent part:
"the standards contained in this section do not relieve the recipient of the contractual
responsibilities arising under its contract(s). The recipient is the responsible authority,
without recourse to the Federal awarding agency, regarding the settlement and
satisfaction of all contractual and administrative issues arising out of procurements
entered into in support of an award or other agreement. This includes disputes, claims,
protests of award, source evaluation or other matters of a contractual nature."
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The County and HIEDB were both responsible to ensure that all rules were applied to any sub -tier
contracts. Draft copies of HIEDB's Request for Proposals (RFP) for the Phase II Project were
included in DEM's program files, but did not completely document the entire procurement process.
Documentation of the procurement process was observed during the audit team's subsequent site visit
to HIEDB on March 22, 2006, but apparently had not been requested or reviewed by DEM. No
material exceptions to the procurement rules were noted. Appropriate manuals pertaining to federal
procurement laws received electronically from EPA by HIEDB were observed by auditors. Skylark
Rossetti of HIEDB communicated to auditors that all procurements were made in compliance with
applicable federal procurement laws.
On May 11, 2006, auditors contacted Ms. Timonie Hood, U.S. EPA Region 9 Project Officer, to
inquire whether the EPA had conducted a compliance audit of these grant awards, and if so, what
were its findings related to compliance with federal procurement law. Ms. Hood indicated that while
the EPA had not reviewed or audited the awards, she had worked closely with the County and
HIEDB to ensure that both were fully aware of responsibilities contained in the "Regulations for
Cooperative Agreements and Grants to Non - Profit Organizations" Manual of June 2001, and the
Office of Management and Budget (OMB) Circulars A -87, A -102, A -110, A -122, and A -133 that
relate to cost, administration, and audit requirements for federal grants. The regulations had been
provided to the recipients electronically when the grant was awarded.
Analysis of billing and payment records from DEM indicate that of the total $223,500 grant funds,
HIEDB received $61,500 for administration and management, BSH received $155,000 for
operational services, and Recycle Hawaii received $27,000 for education and public awareness
programs. Further analysis of HIEDB's Invoice No. 05 -148 dated June 30, 2005, indicates that
subcontractor BSH submitted Invoice No. KRAK0507 to HIEDB for May 2005 in the amount of
$12,175.04, and subsequently submitted a revised invoice totaling $12,325.04 to HIEDB on July 14,
2005. BSH also submitted Invoice No. KRAK0508 for June 2005 in the amount of $10,940.51 that
was subsequently revised to $10,825.46. Subsequently, HIEDB's Invoice No. 05 -197 dated
September 30, 2005, billed for additional BSH Invoice revisions totaling $17,314.72 for the period
November 2004 to June 2005. (See table below).
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Table 1.5
EPA Phase II
Business Services Hawaii
Revised Invoices
Fiscal Year 2004 -2005
invoice
Original
Revised
Difference
Number
Month
Amount
Amounts
Paid
KRAK0501
November'04
$12,948.16
$14,899.29
$1,951.13
KRAK0502
December'04
$15,946.65
$16,461.02
$514.37
KRAK0503
January '05
$18,183.03
$18,541.99
$358.96
KRAK0504
February '05
$17,079.71
$17,862.59
$782.88
KRAK0505
March '05
$16,378.58
$14,659.99
($1,718,59)
KRAK0506
April '05
$11,498.64
$15,570.62
$4,071.98
KRAK0507
May'05
$12,325.04
$14,090.17
$1,765.13
KRAK0508
June '05
$10,825.46
$20,414.32
$9,588.86
Total
$115,185.27
$132,499.99
$17,314.72
Note — Contract allows for additional expenses for May and June 2005 only.
Findings
1. The lack of clearly defined procurement documents do not permit accurate bid proposals
and contract prices.
If tasks, measurable performance objectives, and process controls had been specifically
communicated in procurement documents, contractors would have been better able to submit
accurate bid proposals and complete tasks at contracted prices, reducing DEM's need to issue
supplemental contracts to allow for processing of increased volumes.
2. DEM files lack sufficient supporting documentation for the additional allotment of funds in
Supplemental Contract No. 1.
Supplemental Contract No. I to Contract No. 4093 between the County and HIEDB was issued
on May 10, 2005, for the period May and June 2005, for an additional $30,000, to cover
administrative expenses and supplement operational costs. After deducting 10 percent for
administrative expenses, HIEDB entered into a subsequent agreement with subcontractor BSH on
May 29, 2005, in the amount of $27,000, for additional staffing and site modifications to allow
for increased waste diversion from the Kealakehe landfill through June 30, 2005. No
correspondence or supporting documentation from either HIEDB or BSH was observed in the
program file to evidence problems relating to administrative or operational costs, staffing, or site
modifications that would prompt this additional allotment of funds.
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Chapter 3 EPA GRANTS
3. DEM files lack sufficient supporting documentation for appropriations from a County fund
account to supplement a federal grant program.
The aforementioned additional funds of $30,000 for Supplemental Contract No. 1 were allocated
at DEM's discretion from its Recycling Program Account instead of the Federal Grant Account
for waste reduction and recycling. No written authorizations or documentation were observed in
the program file to support the use of County funds to supplement an EPA or other federal grant
program.
4. DEM files lack sufficient supporting documentation for revision and payment of invoices
for prior billing periods.
In reviewing expenditure records for this EPA grant program, auditors noted that HIEDB Invoice
No. 05 -197 dated September 30, 2005, contained eight revised invoices from subcontractor BSH
for the period November 2004 to June 2005, for the total additional amount of $17,314.72. The
revised invoices indicated adjustments made to expenses for personnel, equipment leasing,
contractual supplies, and commodities. Supplemental Contract No. 1 dated May 24, 2005,
allowed for increased operational expenses for May and June 2005, but did not allow for
increased operational costs for the prior period November 2004 through April 2005.
5. DEM did not efficiently utilize grant funds.
Administrative costs for first tier subcontractor HIEDB totaled $61,500 for the 18 -month contract
period from January 1, 2004 to June 30, 2005, itemized as follows: $43,000 for personnel costs,
$8,500 for fringe benefits, and $10,000 for other supplies. This averages to a monthly cost of
approximately $3,400 for administration by a first tier subcontractor to which two second tier
subcontractors report regarding implementation of program components. This raises the issue of
efficient utilization of federal grant monies, and the question of outsourcing grant administration
versus hiring of additional departmental personnel to be tasked with grant writing, administration,
and supervision.
6. DEM was in violation of DOH permit requirements.
The "Kona Recycles at Kealakehe" was operating without a proper DOH permit during its first 11
months of operation beginning November 1, 2004. DOH notified DEM of the permit deficiency
and supplied a permit application on December 29, 2004, for completion and submittal by the
County. Factors contributing to delays in obtaining the required permit included a typographical
error by DEM of the subject tax map key parcel, which was not discovered until a DOH site
inspection on February 3, 2005, and the submittal of an earlier limited impact "permit by rule"
application which was disallowed due to the cardboard baling operations being conducted on the
site. A general solid waste management permit for the Kona Recycles facility was finally issued
by DOH on September 2, 2005.
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Chapter 3 EPA GRANTS
7. DEM did not adequately document resolution of DOH permit violations.
During the audit period, auditors were unable to determine the chronology of events for the DOH
permit application process for the Kona Recycles at Kealakehe Recycling Center.
Correspondence from DOH referenced other letters that were not in the DEM program file, and
corrective actions by the County could not be fully documented.
Recommendations
1. We recommend that DEM re- evaluate its procurement process to ensure that all
performance requirements and tasks are sufficiently communicated to all potential
providers and that process volume estimates are realistic.
• To ensure fairness in the procurement process.
• To allow for accurate budgeting and contracting and reduce the need for issuance of
supplemental funding contracts.
2. We recommend that DEM document issues related to supplemental contracts when two
different fund sources are involved. Documents should include a detailed chronology of events
that necessitated the funding action and a written analysis of the decision to authorize
commitment of additional funds.
3. We recommend that DEM reconcile contractor invoices with supporting documentation
and contractual requirements and should require that revised invoices be accompanied by
written clarification of increased amounts. Supplemental contracts should only be based on
increases to contract scope at the County's request.
4. We recommend that DEM re- evaluate its administration of grant programs and analyze the
cost - benefits of hiring additional personnel for grant management versus contracting
private service providers. The analysis should weigh the procurement of one contractor for a
specific contract against the dedication of an internal personnel position(s) for the administration
of multiple contracts.
5. We recommend that DEM review and monitor its contracts to ensure that all applicable
governmental permits are obtained prior to commencement of work on County property.
Permits must also be timely obtained by DEM to avoid assessment of sanctions and penalties
against the County and the waste of public funds.
b. We recommend that DEM ensure that all documentation relating to grant and contract
administration is current and complete in the program file. Documentation should include,
but not be limited to, all intra- and inter - departmental communications, communications to and
from State and federal regulatory agencies, all governmental permit application and approvals, all
regulatory -agency evaluations and inspection reports, and all correspondence, plans, and reports
from program contractors and subcontractors.
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Chapter 3 EPA GRANTS
7. We recommend that DEM document any deficiencies relating to operations under its
contracts. Documentation should include, but not be limited to, a chronology of events, the
cause of deficiencies, corrective actions implemented to remedy deficiencies, and final resolution
of said deficiencies.
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Chapter 3 EPA GRANTS
PHASE III: WASTE REDUCTION AND RECYCLING PROJECT (WEST HAWAII)
Federal Grant (EPA/County)
On September 13, 2004, the EPA awarded Grant No. X- 97998801 -0 to the County for the period
October 1, 2004 to October 31, 2006, in the amount of $397,600. The grant is entitled "Special
Appropriation — Waste Reduction and Recycling Project." The project description in the EPA
Cooperative Agreement reads: "The County of Hawaii in conjunction with the Hawaii Island
Economic Development Board will establish and implement community development recycling
models for resource management by implementing waste diversion strategies in West Hawaii. These
will focus on participation of both the residential and commercial sector in recycling efforts."
The County's grant application cited the following objectives:
• Enhance existing transfer station(s) located in West Hawaii to provide recycling to the
residential public.
• Create opportunities for West Hawaii residents to re -use items that have value to the
community.
• Promote participation in recycling through public awareness and education.
• Report project progress and results.
The project timeline submitted with the County's original grant application called for:
• An operational green waste diversion program by January 2005.
• A commercial /residential recycling conference to be conducted by May 2005.
• An operational reuse center by July 2005.
Following is a brief summary of "Administrative and Programmatic Conditions" contained in the
EPA grant.
• Condition 1: Requirement for Financial Status Reports (FSR). The initial FSR is due on
December 31, 2005. The FSR covering the entire project period is due within 90 days after
the end of the project period.
• Condition 2: Recipient shall comply with the Single Audit Act and OMB Circular A -133.
• Condition 3: Recipient must submit to the Grants Management Office, PMD -7, a Minority
Business Enterprise /Women Owned Business Enterprise (MBE/WBE) Utilization Report
(EPA Form 5700 -52A), by October 30th of each calendar year.
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Chapter 3 EPA GRANTS
Condition 4: Recipient agreement regarding "fair share" goals and objectives for all project
related procurement: If the recipient does not want to rely on the Hawaii MBEIWBE "fair
share" goals negotiated with the EPA for fiscal year 2002, the recipient agrees to submit
proposed MBE /WBE "fair share" goals to Joe Ochab, PMD -1, within 30 days of the grant
award to be approved by EPA no later than 30 days thereafter.
• Condition 5: The cost principles of OMB A -87 are applicable to this award. Since there are
no indirect costs included in the assistance budget, they are not allowable under this
Assistance Agreement.
Condition 6: The recipient agrees to comply with Title 40 CFR Part 34, "New Restrictions on
Lobbying." This provision is required for inclusion in all sub -award documents for sub -
awards exceeding $100,000, and requires that the sub- recipient(s) submit certification and
disclosure forms accordingly. Title 40 CFR Part 34 also provides: "In accordance with the
Byrd Anti - Lobbying Amendment, any recipient who makes a prohibited expenditure under
Title 40 CFR Part 34 or fails to file the required certification or lobbying forms shall be
subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such
expenditure."
• Condition 7: County CEO shall require that no grant funds be used to lobby the federal
government or litigate against the United States. The County is mandated by law to provide
such certification on Form 5700 -53 within 90 days after the end of the project period.
Condition 8: Recipient agrees to use recycled paper for all reports which are prepared as part
of the agreement and delivered to EPA. Recipient shall comply with the requirements set forth
in Section 6002 of the Resource Conservation and Recovery Act (RCRA) (42 U.S.C. 6962).
RCRA Section 6002 regulations apply to item procurements greater than $10,000, and require
that preference be given to products containing recycled materials identified in EPA
guidelines at 40 CFR 247.
• Condition 9: Recipient agrees to ensure that all conference or training space funded by
federal funds complies with the Hotel and Motel Fire Safety Act of 1990.
• Condition 10: Recipient shall ensure that all procurement transactions are conducted in a
manner which provides for full and open competition per 40 CFR 31.36.
Condition 11: Recipient shall comply with Subpart C of 40 CFR, Part 32, "Responsibilities
of Participants Regarding Transactions," and ensure that any lower tier covered transactions
include a condition requiring compliance with Subpart C. Failing to disclose the required
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FY 2002 "fair share" goals
— Hawaii
MBE
WBE
Construction
50%
4%
Supplies
21%
2%
Services
29%
7%
Equipment
27%
2%
• Condition 5: The cost principles of OMB A -87 are applicable to this award. Since there are
no indirect costs included in the assistance budget, they are not allowable under this
Assistance Agreement.
Condition 6: The recipient agrees to comply with Title 40 CFR Part 34, "New Restrictions on
Lobbying." This provision is required for inclusion in all sub -award documents for sub -
awards exceeding $100,000, and requires that the sub- recipient(s) submit certification and
disclosure forms accordingly. Title 40 CFR Part 34 also provides: "In accordance with the
Byrd Anti - Lobbying Amendment, any recipient who makes a prohibited expenditure under
Title 40 CFR Part 34 or fails to file the required certification or lobbying forms shall be
subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such
expenditure."
• Condition 7: County CEO shall require that no grant funds be used to lobby the federal
government or litigate against the United States. The County is mandated by law to provide
such certification on Form 5700 -53 within 90 days after the end of the project period.
Condition 8: Recipient agrees to use recycled paper for all reports which are prepared as part
of the agreement and delivered to EPA. Recipient shall comply with the requirements set forth
in Section 6002 of the Resource Conservation and Recovery Act (RCRA) (42 U.S.C. 6962).
RCRA Section 6002 regulations apply to item procurements greater than $10,000, and require
that preference be given to products containing recycled materials identified in EPA
guidelines at 40 CFR 247.
• Condition 9: Recipient agrees to ensure that all conference or training space funded by
federal funds complies with the Hotel and Motel Fire Safety Act of 1990.
• Condition 10: Recipient shall ensure that all procurement transactions are conducted in a
manner which provides for full and open competition per 40 CFR 31.36.
Condition 11: Recipient shall comply with Subpart C of 40 CFR, Part 32, "Responsibilities
of Participants Regarding Transactions," and ensure that any lower tier covered transactions
include a condition requiring compliance with Subpart C. Failing to disclose the required
110
Chapter 3 EPA GRANTS
information may result in negation of the assistance agreement, or pursuance of legal
remedies, including suspension and debarment.
• Condition 12: Grantee will submit quarterly reports related to activities completed under the
agreement to the EPA Project Officer within 30 calendar days after the end of each quarter.
Condition 13: All outreach materials, including press releases, brochures, and other materials
must clearly state the project was made possible in part by funding from the U.S.
Environmental Protection Agency Region 9.
Condition 14: All written materials must be printed on recycled paper with a minimum 30%
post- consumer recycled content, and all outreach materials will reference the use of recycled
content paper.
Memorandum of Agreement (County/RIEDB)
A Memorandum of Agreement (MOA) was entered into between the County of Hawaii and Hawaii
Island Economic Development Board (HIEDB), for the term of May 9, 2005 to June 30, 2006, in the
amount of $136,000. The MOA states:
"Whereas, the County and HIEDB have applied for and received a $397,600.00
Environmental Protection Agency (EPA) grant amendment (ID #X- 97917701 -2) to
conduct a joint project in renewable resource management herein referred to as the
`Project'. The County and HIEDB will jointly participate in the Project to establish
and implement a community development model by enhancing the existing solid
waste transfer station system in West Hawaii to provide for both residential and
commercial recycling."
Under the MOA, HIEDB's scope of services was as follows:
HIEDB shall "assist in coordinating the project and ensuring that information about the
project is widely disseminated within our community and other tasks as follows and as laid
out more specifically in the "Scope of Work 3`d Year Funding EPA/County/HIEDB."
"HIEDB shall conduct public outreach relating to commercial recycling /reuse options
including hosting a conference on commercial recycling strategies including models of
"green" hotels shared with local Resort Industry."
"HIEDB shall conduct public education activities relating to residential recycling /reuse
options in conjunction with the demonstration community recycling project at Waimea, and
Hawi or Puako Transfer Stations, in West Hawaii. This includes: i) Hands -on
demonstrations on waste diversion; ii) Publicizing pilot project via radio, newspaper, public
access TV, email, internet, County newsletter; and iii) Distributing quarterly handouts on
diversion rates, proper preparation of recyclables, reuse options, and other findings of the
project for dissemination to the public."
III
Chapter 3 EPA GRANTS
• HIEDB shall administer travel and transportation funds to cover any and all travel and
transportation costs related to conferences and transport of equipment needed to apply
appropriate technologies for primary processing of plastics for recycling.
• HIEDB shall provide monthly status and quarterly progress /financial reports to the County on
all activities conducted under the project.
HIEDB shall deliver to the County an electronic copy in MS Word or pdf format, and a
master copy for hard copy reproduction, of a final report for the project. The report shall
cover lessons learned, participation rates, vehicle /truck/other counts at the beginning and
ending of the project, tonnages of recyclables collected, types of recyclables collected, and
other information as relevant to the overall project.
• HIEDB shall notify the County in a timely manner of any material changes in project budget.
• HIEDB shall comply with terms and conditions of Grant No. X- 97917701 -2 of the
Cooperative Agreement between the County and the EPA, including assuming fiscal liability
for the proper administration of all funds dispersed. 1IVote: Correct Grant No. is X-
97998801-0]
The MOA also addressed County services including, but not limited to:
"Develop and publish an Invitation For Bids for enhancement of at least one West Hawaii
transfer station, for the sole purpose of providing community recycling options and selecting
vendor(s) for enhanced recycling opportunities. Waimea Transfer Station will receive the first
priority. Hawi and Puako Transfer Stations will receive the second priority as logical and
reasonable in context of the overall project goals. This includes: i) evaluating all bidders
based on criteria which promotes replication of recycling model and continuing enhancement
of other selected Transfer Stations; ii) contracting with eligible providers; iii) managing
contracted recycling services for the duration of the Project; iv) coordinating and training of
County employees for the success of the Project; v) reviewing all reports and submittals by
HIEDB; and vi) processing payments to HIEDB in a timely manner."
Audit Narrative
Grant Compliance Issues
Pursuant to Administrative Condition No. 1, the Form 269A Financial Status Report for the period
ending September 30, 2004, was due December 31, 2005, but its transmittal letter is dated January 3,
2006.
Pursuant to Administrative Condition No. 3, a MBE /WBE Utilization Report (Form EPA 5700 -52A)
needed to be submitted to the Grants Management Office, PMD -7, by October 31, 2005. However,
no such documentation was observed in the program file.
112
3 EPA GRANTS
Pursuant to Administrative Condition No. 4, MBE/WBE "fair share" goals needed to be submitted
within 30 days of the grant award. However, no such documentation was observed in the program
file.
Regarding Administrative Condition No. 6, the MOA does not specifically include required Anti -
Lobbying language. However, Item H of HIEDB's Scope of Services, states that HIEDB shall
comply with the terms and conditions of the EPA's Cooperative Agreement.
Regarding Administrative Condition No. 8, there is insufficient evidence contained in the program
file to ascertain HIEDB's compliance with the required use of recycled paper for reports submitted to
EPA. Auditors observed that a flyer relating to a "recycling conference" did state that it was printed
on paper with 30% post - consumer content as required by Administrative Condition No. 14.
Regarding Programmatic Condition No. 12, it was observed that submittal of required quarterly
reports did not begin until June 2005, when a report was submitted for the period January to March
2005. Also, reporting for the period April to June 2005 was included with the July to September 2005
report submitted in October 2005, and the October to December 2005 report was not submitted until
February 2006.
Regarding Programmatic Condition No. 13, auditors reviewed electronic copies of the project press
release, flyer, and registration forms for the "recycling conference." The press release stated the
amount of federal funding received from the EPA. The flyer included County and EPA logos, but it
did not include any discussion of funding provided by the federal and county governments. The
registration forms only contain the name and logo for HIEDB.
MOA Compliance Issues
The EPA grant issued to the County for the subject project is Grant No. X- 97998801 -0. It is not
Grant No. X- 97917701 -2 as indicated in the MOA between the County and HIEDB, which would
have been an amendment to Grant No. X- 97917701 -1 issued to the County for the Kea`au Recycling
and Reuse Center (KKRC).
EPA Grant No. X- 97998801 -0 is dated September 13, 2004. The MOA between the County and
HIEDB is for the term May 9, 2005 to June 30, 2006. However, HIEDB's invoices to the County
included charges for personnel costs from October 2004 through April 2005.
Apparently, HIEDB subcontracted the outreach and education portion of the project to a firm known
as "Current Events ". From review of billings from "Current Events" to HIEDB submitted as support
documentation for billings from HIEDB to the County, it appears that "Current Events" billed
HIEDB for a flat "retainer" fee each month, which HIEDB would then allocate to the various projects
that "Current Events" handled. From HIEDB's notes regarding project and account allocations, it
appears that allocations to this specific project were not always based on actual time and expenditures
expended for the project. For example, the "Current Events" invoice dated August 31, 2005, was
apportioned one -third to each of three projects. However, HIEDB's handwritten notes on the subject
invoice do not indicate any activity related to the EPA Phase III grant.
113
Chapter 3 EPA GRANTS
Also, the development of an operational recycling /reuse facility as proposed in the original grant
application has not been accomplished. In discussions with the Department of Environmental
Management (DEM), Director Barbara Bell advised that the original plan was to implement a reuse
and recycle facility at the Waimea transfer station based on the KKRC and Kealakehe models.
However, issues arose during permitting of the Waimea beverage container redemption center that
have prevented development of the site. The State Department of Health (DOH) will not permit an
expanded recycling facility until the County has completed a survey identifying waste boundaries
relating to the old landfill and developed site drawings and fire management and monitoring plans.
In May 2006, a contract was subsequently issued from DEM to Mt. Edge to conduct an assessment of
the "old landfill" boundaries and develop a fire suppression and monitoring plan. The total contract
amount is $100,000, with $50,000 to be paid from EPA Grant III and $50,000 to be paid from the
DEM solid waste fund.
According to the grant application, a "recycling conference" was to have taken place in the period
February to April 2005. Later, according to a quarterly status report for the period January to March
2005, the conference was to have been held in September or October 2005. Most recently, the
conference is scheduled for May 2006.
As of February 7, 2006, HIEDB has been paid $26,408.95. Review of billings submitted by HIEDB
indicates that this amount relates to salaries, fringe benefits, and overhead expenses for the period
October 2004 to December 2005, in preparation for the "recycling conference," and a portion of
HIEDB expenditures paid to a subcontractor for community outreach activities. HIEDB's quarterly
project status reports do not indicate any outreach events having taken place as of December 2005.
Finding
1. The County has not submitted timely reports to EPA as required by the grant agreement.
• Quarterly Status Reports
• The January to March 2005 report was stamped received by DEM on June 6, 2005, with
no documentation as to when the report was submitted to EPA.
• The April to June 2005 and July to September 2005 reports were combined and submitted
to EPA in October 2005.
• The October to December 2005 report was submitted to EPA on February 8, 2006.
Form 269A, Annual Financial Status Report
o The annual report due to EPA on December 31, 2005, was not submitted until January 3,
2006.
E =mail correspondence between Recycling Coordinator Eileen O'Hora -Weir and DEM
Director Barbara Bell indicate that contractor performance may not have been satisfactory,
stating that departmental personnel had to re -write and complete project status reports before
submission to EPA.
114
Chapter 3 EPA GRANTS
2. The County is not in compliance with several "Administrative Conditions" of the grant
agreement.
• Administrative Condition No. 3: There is no evidence of submission of Form 5700 -52A
regarding MBE /WBE that was required to be filed with EPA by October 31, 2005.
• Administrative Condition No. 4: There is no evidence of the submission of "Fair Share
Objectives" that were required to be filed with EPA by October 13, 2005.
• Administrative Condition No. 6: There is no evidence of the submission of lobbying
certification forms.
• Administrative Condition No. &: There is insufficient documentation in the program file to
ascertain whether all reports submitted to EPA were printed on recycled paper.
• Administrative Condition No. 9: There is no evidence that the hotel contracted to house
participants at a required "Recycling Conference" complies with the Hotel and Motel Fire
Safety Act of 1990.
• Administrative Condition No. 12: Quarterly status reports were not timely submitted. (See
Finding No. 1 above.)
• Administrative Condition No. 13: The only sample of outreach materials, press releases,
brochures, and other materials prepared by the subcontractor and included in the program file
was a copy of a draft flyer promoting the Recycling Conference. While the flyer includes the
EPA logo, it does not "clearly state that this project was made possible in part by funding
from the U.S. Environmental Protection Agency," as required by this administrative
condition. Other materials reviewed on HIEDB's website included conference registration
forms, a flyer, and an undated press release. Only the on -line flyer includes the EPA logo.
Neither the printable or on -line registration forms include any reference to the County or
EPA. Only the undated press release contained reference to EPA funding.
• Administrative Condition No. 14: There is insufficient documentation to determine
compliance with a requirement that "all written materials will be printed on recycled paper
with a minimum of 30% post consumer recycled content, and all outreach materials will
reference the use of recycled content paper."
3. DEM has been unable to implement its EPA program objectives.
Of its original major project objectives, only a "recycling conference" will be completed within
the funding period, and it is more than a year behind schedule.
4. DEM has not addressed the change in project scope for HIEDB.
• Although 10 of the 14 tasks included in its "Scope of Work P Year Funding" are directly
related to promotion of a recycling and reuse center at a West Hawaii transfer station, a
115
Chapter 3 EPA GRANTS
recycling or reuse center will not be put into operation prior to expiration of the funding
period. However, DEM has not initiated a reduction in HIEDB's $136,000 contract amount.
5. DEM has not addressed deficiencies in HIEDB's performance under the MOA.
• DEM has not required written monthly status reports from the contractor as stipulated in the
MOA.
• Quarterly status reports for the period April to September 2005 indicate:
• April to June 2005 - "very little activity on 3' year funding"
• June 2005 — "met with West Hawaii Task Force"
• July 2005 — "met with HIEDB Board of Directors for more names to serve on the West
Hawaii Task Force"
• August to September 2005 -- "confirmed members for the West Hawaii Task Force.
Moving forward with a Green conference in West Hawaii."
• Quarterly status reports prepared by HIEDB for the period October to December 2005
indicate:
• October 3 to 8, 2005 — "began public outreach relating to commercial recycling /reuse
options"
• October 10 to 16, 2005 — "Research underway for potential speakers for conference..."
• DEM has not required documentation to substantiate HIEDB claims for reimbursement of
personnel salaries, payroll taxes, health insurance, and office expenses billed since October
2004. Documentation submitted to support contractor billings was not always complete or did
not sufficiently evidence how charges related to the specific program.
Recommendations
1. We recommend that DEM initiate a complete assessment of waste reduction, recycling, and
reuse capabilities at County transfer stations.
• For those transfer stations with waste reduction capability, identify necessary repairs and
related costs to continue diversion, recycling, and reuse activities.
• For those transfer stations lacking waste reduction capability, evaluate design, permitting,
cost, timeline, and manpower issues for implementation of diversion, recycling, and reuse
activities.
2. We recommend that DEM implement internal policies and procedures for grant
management, including:
• Oversight of contractor and subcontractor performance and billings.
116
Chapter 3 EPA GRANTS
• Tracking of compliance with funding agency requirements, including completion, review, and
submission of reports in a timely manner.
Review and approval of all press releases and outreach and educational materials for
compliance with grant requirements prior to publication and dissemination.
• Monitoring of contracts to enable timely negotiations for contract extensions or new
procurements.
3. We recommend that DEM consider revising HIEDB's project scope or reduce its contract
amount under the MOA, since establishment of the model recycling or reuse center in West
Hawaii will not be implemented prior to expiration of the EPA Grant III funding period.
4. We recommend that DEM review departmental policy relating to multi-tier subcontracting,
and determine whether the practice is a cost effective use of grant monies.
5. We recommend that as the designated recipient of EPA grant funds, the County should re-
evaluate the cost - benefit of hiring additional departmental personnel over outsourcing
program management and outreach and education components.
Subsequent Events
In February 2006, DEM submitted a "proposed project amendment" to EPA. The proposal was to
amend project objectives with no change in project funding.
The new objectives under this project amendment are to:
1. `Enhance existing transfer station(s) located in West Hawaii to provide recycling to the
residential public."
• "Identify appropriate redevelopment mechanisms for enhancement of the Waimea
transfer station and old landfill area to promote residential participation in recycling."
2. "Create opportunities for Hawaii County residents to recycle and re -use items that have
value to the community."
• "Design and plan a recycling center in conjunction with the Reload Facility approved
for East Hawaii that will provide full- service recycling and diversion opportunities for
both the residential and commercial sectors."
• "Provide a mechanism for the collection and diversion of residential Greenwaste from
the islands transfer stations by disseminating 700 high - quality composting units in
West and North Hawaii that divert nearly 1 ton /year/houschold of organic materials
through conversion into a valued soil amendment."
117
Chapter 3 EPA GRANTS
3. "Promote participation in recycling through public awareness and education."
4. "Report project progress and results."
Although no formal documentation of EPA approval was located in the program file, a handwritten
note on a copy of the amended project proposal indicated that Timonie Hood, Green Building
Coordinator of EPA Region 4, verbally approved the amendment on March 13, 2006.
118
Site Characteristics for Existing Transfer Stations (FY2006)
Transfer Station
Name
District
Approx.
Population
Served =
Parcel
Size
(Acres)
Number
of Chutes
'04M
Tonnage
(Tons /Day)
Distance to
Puuanahulu
Distance
to Hilo
Landfill
Tax Map
Key
Gated Hours of
Operation
Recycle Facilities
AV
F
East Hawaii
Keaau
Puna
11,700
19.54
2
18.92
83.1
9
1- 6-03:065
6:30am - 6:30 m
B
x
x
x
x
x
x
x
x
Pahoa
Puna
91400
3.77
2
16.31
94.4
20
1- 5-08:007
B
x
x
x
x
x
x
Kala ana
Puna
1,200
13.20
1
3.46
105.4
31
1- 2- 07:004
Volcano
Puna
2,000
2.19
1
4.88
103.2
21
1 -9- 01:002
1
Glenwood
Puna
"4300
1.97
1
8.63
96.1
301
-8- 08:023
1
Hilo
S. Hilo
42,000
72.70
4
37.70
77.5
2
2 -1- 13:150
6:30am - 5:00 m
B
x
x
x
x
x
x
x
x
Honomu
S. Hilo
3,400
0.84
1
5.03
63.7
21
2- 8- 15:023
1
Pa alkou
S. Hilo
5,800
0.57
1
10.23
69.6
15
2- 7- 28:052
6:30am - 6:30 pm
1
I
I
Ix
Lau ahoehoe`
N. Hilo
1,700
1.02
1
3.32
50.9
35
3 -5- 04:084
1
x
x
x
x
x
Paauilo`
Hamakua
1,800
0.85
1
4.93
403
42
4- 3- 04:017
Honokaa`
Hamakua
5,100
0.731
1
10.18
34.1
49
4 -5- 10:021
6:30am - 6:30 pm
2
x
x
x
x
x
1x11
Pahala`
Ka'u
1,700
0.75
1
3.84
90.6
51
9-6- 05:051
1
x
x
I x
x
x
West
Hawaii
Kohala/Hawi
N. Kohala
6,000
17.28
1
13.20
34
5-5 -02:032
B
x
x
x
x
x
x
Puako
S. Kohala
5,600
8.90
1
6.74
7
6-6 -02:039
6:30am - 6,30 pm
1
x
X
x
x
x
x
Waimea
S. Kohala
11,700
0.311
2
20.19
19
6- 6-01:050
6:30am - 6:30 pm
4
x
x
x
x
x
x
Kallua
N. Kona
21,000
30,321
3
27.63
22
7-4- 20:016
6:30am - 6:30 pm
O
x
x
x
x
x
x
x
x
Keauhou
1N.Kona
8,500
5.471
2
14.91
32
7 -9- 17:009
6:30am - 6:30 pm
2
x
x
x
x
x
x
Ke'ei
S. Kona
5,600
11.60
1
8.47
44
8- 3-04:011
Waiea
S. Kona
3,300
2.28
1
9.47
46
8-6- 0$:011
MIIOIii
S. Kona
700
0.17
1
0.44
65
8-9 -04:007
1XX
Waiohinu`
Ka'u
3,000
31.65
1
8.69
78
63
9-5- 05:001
1
x
x
x
x
B = 20' Blue roll
-off bin with side
holes
" Loads from these stations are hauled to West Hawai'i landfill (Pu`uanahulu)
Previous estimates higher than current estimates
Weekend Redemption Centers
Highlight indicates services that will be in place by the end of FY 2005 -06
1,2,3, 4 = Number of 3 cubic yd bins
O = Open top 20' roll -off bin
CADocuments and SettingsMICTORINBLocal SettingslTemporary Internet Files10LK2BISite Characteristics for Transfer Stations 2006.xis
EXHIBIT 1.1 Prepared by DEM SW
Updated 12/06/2005
by RS1
MAHUKONA
N
W E
x4.o�a HUNOKAA S PUBLIC FACILITIES -
w °' PAAUZLO
KAwAi�IAE LANDFILLS I TRANSFER STATIONS
-
Puako {TIS in1AIII�A paaoilo (TIS) r,, LAUPAHOEHOE
f r = Note: This map was produced bythe Conaky of Hawaii,
AIKOLO Laupah6ohoe (T /,S Planning Depatrnent. It is intended for planning
,• pLuposes only and should not be used for boundary
Puuanahulu Landfill
!Wa, of yf /S) P - -:.r HAKALAU mtegretahons or other spatial analysis beyond fine
Horxlti {/5 limitations of the data
PEPEEKEO Source
:.... - County of Hawaii, Department of Public Works,
W t Papalkou{i;/S) ' Solid Waste Division
r Hilo Landfill
loA (T/S} { Hilo (T /S)
�.
4
KAILUA N ote
r U . Proposed Landfill in East Hawaii area.
KEAUHOU Xeauhctr.(1'/S)
Glenwob T/
J - :- KAPOHO
KPAL.4KEKU 'ei T) - �Ican . T /S} - pah , TJ
LCANO .
iltfaisa (TfS) ;} > pan -a. (T/S) KALAPANA
I I
MILOLII ilolii {/,S) Pahalla (T/S) ~
OCEAN
can w (T S)
Landfill 1 Transfer Station (T /S) {Existing)
NAAL•EHU Landfill f Transfer Station (TIS) (Proposed)
facdbl (11115101)
0 10 20 30 40 50 8o 70 e0 Miles
EXHIBIT 1.2 As recopied from UISWMP
RECYCLE DIVERSION GRANTS PROGRAM AUDIT SAMPLE
SCHEDULE OF CONTRACTS REVIEWED
Page 1 of 2
Exhibit 1.3 Prepared by LAO
Contract
Contract
Funds
Budget
K
Award
Contract Description
Awardee
#
Date
Term
Cert.
Account
Amount
Code
Misc. Contract Services
Scrap Metal Disposal 2004
Big Island Scrap Metal (BISM)
3136
3128103
3128103 3127113
x
075- 641 - 5641.02 -115
$ 125,000.00
1
Scrap Metal Disposal 2004
Big Island Scrap Metal (BISM)
3136 sl
9118103
9118103- 3127113
x
075 -641- 5641.02 -115
300,000.00
S
Scrap Metal Disposal 2005
Big Island Scrap Metal (BISM)
3136s2
11/24/03
12112103 - 3127113
x
075 -641- 5641.02 -115
330,000.00
S
Scrap Metal Disposal 2005
Big Island Scrap Metal (BISM)
3136s3
2/23/04
313104 - 3/27113
x
075 -641- 5641.02 -115
500,000.00
S
Scrap Metal Disposal 2005
Big Island Scrap Metal (BISM)
3136s4
1113/04
1113/04- 3127/13
x
075- 641 - 5641.02 -115
500,000.00
S
Scrap Metal Disposal 2005
Big Island Scrap Metal (BISM)
3136s5
4115105
415/2005 - 3127/13
x
075- 641 - 5641.02 -115
500,000.00
S
Greenwaste Diversion 2004
Hawaii Metal Recycling (HMR)
3182 sl
918/03
7/1103 12/31/03
x
085 -601- 5604.21 -115
294,648.00
S
Greenwaste Diversion 2004
Hawaii Metal Recycling (HMR)
3182s2
4123104
111104 6130104
x
085 -601- 5604.21 -115
315,000.00
S
Greenwaste Diversion 2005
Hawaii Metal Recycling (HMR)
3182s3
10/11/04
7/1104 6/3105
x
085 - 601 - 5604.21 -115
1,030,000.00
S
Greenwaste Diversion 2005
Hawaii Metal Recycling (HMR)
3182s4
5/10/05
711/04 6/3/05
x
085 -601- 5604.21 -115
165,000.00
S
Household Hazardous Waste 2004
EnviroServices & Training Center
3049
9/3103
711/03 6130104
x
085 - 601 - 5604.21 -115
140,036.00
S
Household Hazardous Waste 2005
EnviroServices & Training Center
3041
1017104
7/1104 6130/05
x
085- 601 - 5604.21 -115
145,036.00
S
Used Tire Program 2004
Big Island Scrap Metal (BISM)
4076
11/10/03
11/10/03 11191D4
x
075 -641- 5641.02 -115
120,000.00
1
Outreach Education 2004
Recycle Hawaii
4035
817103
711103 6130104
x
085 -601 - 5604.21 -115
40,000.00
E
Outreach Education 2004
Recycle Hawaii
4035
817/03
711103 6130/04
x
085 -601- 5604.30 -115
55,000.00
E
Outreach Education 2004
Recycle Hawaii
4035 sl
111/04
111/04 6/30/04
x
085 - 601 - 5604.02 -115
70,000.00
E
Outreach Education 2004
Recycle Hawaii
4035s2
5/3104
111104 6/30104
x
085 -601- 5604.30 -115
6,205.00
E
Recycling Centers @ KRRC 2005
Recycle Hawaii
03 -0331
6125/04
71104 6/30105
x
085 -601- 5604.21 -115
142,648.00
R
Recycling Centers @ KRRC 2005
Recycle Hawaii
03 -331 s1
6125104
71/04 6130105
x
085 - 601 - 5604.21 -115
24,000.00
S
Diversion Grants - Paper 2005
Atlas Recycling Centers
000139
9114/04
7/1/04 12/31/04
x
085- 601 - 5604.21.115
50,000.00
E
Diversion Grants - Paper 2005
Atlas Recycling Centers
000139 sl
11/23/04
7/1104 12/31/04
x
085 -601- 5604.21.115
25,000.00
S
Diversion Grants - Paper 2005
Atlas Recycling Centers
000317
4/22105
111105 6130/05
x
085 -601- 5604.21.115
68,000.00
E
Diversion Grants - Paper & Plastic 2005
Business Services Hawaii
000143
9/14104
7/1104 12/31/04
x
085- 601 - 5604.21 -115
50,000.00
E
Diversion Grants - Paper & Plastic 2005
Business Services Hawaii
000143 s1
11/23/04
711/04 12/31/04
x
085- 601- 5604.21 -115
15,000.00
E
Diversion Grants - Paper & Plastic 2005
Business Services Hawaii
000301
3124/05
1/1/05 6/30105
x
085 -601- 5604.21 -115
63,000.00
E
Facility Design -Mat. Recovery WH
DR Associates
000360
6130105
245 days
x
085 -601- 5604.52 -115
120,000.00
SP
State Grant Pro rams
Glass Advanced Disposal (ADF)'04
Business Services Hawaii
04062
9123103
711103 - 12/31/03
x
085 -601- 5604.28 -115
72,750.00
E
Glass Advanced Disposal (ADF) '04
Business Services Hawaii
04122
2/19104
111104 - 6130/04
x
085- 601- 5604.28 -115
84,500.00
E
Glass Advanced Disposal (ADF) '05
Business Services Hawaii
000142
9/14104
711104 12/31/04
x
085- 601- 5604.28 -115
73,250.00
E
Glass Advanced Disposal (ADF) '05
Business Services Hawaii
000300
3124105
111105 6130105
x
085 -601- 5604.28 -115
73,250.00
E
Glass Advanced Disposal (ADF)'04
Atlas Recycling Centers
04063
9123103
711103 - 12131103
x
085- 601 - 5604.28 -115
72,750.00
E
Glass Advanced Disposal (ADF)'04
Atlas Recycling Centers
04120
2119/04
1/1104- 6/30/04
x
085- 601- 5604.28 -115
73,750.00
E
Glass Advanced Disposal (ADF)'05
Atlas Recycling Centers
000140
9114/04
7/1104- 12131/04
x
085- 601- 5604.28.115
73,250.00
E
Glass Advanced Disposal (ADF) '05
Atlas Recycling Centers
000318
4122/05
111105- 6130/05
x
085 - 609 - 5604.28.115
73,250.00
E
BCD -1115 2005
ARC of Hilo
000180
12/23/04
1/1105- 6130/05
x
085 -601 - 5607.02.115
150,000.00
E
BCD -H15 2005
ARC of Hilo
180sl
4/27105
111105 - 6130/05
x
085 -601- 5607.02.115
20,000.00
E
Page 1 of 2
Exhibit 1.3 Prepared by LAO
RECYCLE DIVERSION GRANTS PROGRAM AUDIT SAMPLE
SCHEDULE OF CONTRACTS REVIEWED
6,726,963.00 dJ
E Per Contract documents award is exempt from procurement rules under HRS 103D -102
1 Procured by 1FB
S Issued as Supplemental Contract
SP Procured as Purchase of Service, No documentation of procurement process available from Purchasing Dept. - handled by Public Works
0 Total dollars relating to contracts reviewed represents 94.8% of Total contracted dollars per DEM see Exhibit 1.1
Page 2 of 2
Exhibit 1.3 Prepared by LAO
Contract
Contract
Funds
Budget
K
Award
Contract Description
A_wardee
#
Date
Term
Cert.
Account
Amount
Code
BCD -H15 2005
_
ARC of Hilo
180sl
4127/05
111105- 6130105
x
085.601.5604.21.115
10,000.00
E
BCD- H152005
ARC of Hilo
180s2
4/27105
111/05- 6/30105
x
085.601.5604.21.115
7,140.00
E
Federal Grant Proctrams
EPA Round 1 LT Strategic Plan /Keaau
Hawaii Island Economic
Project 2004
Development Board (HIEDB)
3051
9130102
3124103 6130104
x
085 -601- 5607.29 -115
390,000.00
E
EPA Round 2 - Commercial Recycling
Hawaii Island Economic
and Kealakehe Prog. 2004
Development Board (HIEDB)
4093
12/22/03
12122103 - 6130105
x
085 - 601 - 5604.29 -115
223,500.00
E
EPA Round 2 - Commercial Recycling
Hawaii Island Economic
085 -601- 5604.29 -115
10,000.00
and Kealakehe Prog. 2005
Development Board (HIEDB)
4093S1
5110105
5110105- 6130105
x
085- 601 - 5604.21 -115
20,000.00
E
Round 3 - North Hawai'i Recycling
Hawaii Island Economic
Opportunities, Waimea 2005
Development Board (HIEDB)
000324
519105
519105- 6130106
x
085.601.5604.29.115
$ 136,000.00
E
6,726,963.00 dJ
E Per Contract documents award is exempt from procurement rules under HRS 103D -102
1 Procured by 1FB
S Issued as Supplemental Contract
SP Procured as Purchase of Service, No documentation of procurement process available from Purchasing Dept. - handled by Public Works
0 Total dollars relating to contracts reviewed represents 94.8% of Total contracted dollars per DEM see Exhibit 1.1
Page 2 of 2
Exhibit 1.3 Prepared by LAO
Recvclinq Program Contracts for Fiscal Year 2003 -04
Description of Line Item
EPA Waste Reduction /Recycling Projects
FY2004
Vendors
# of contracts &
supplementals
Misc. Contract Services
$ 390,000
Hawaii Island Economic
Development Board (HIEDB)
1
recycle glass
Organics /Greenwaste Diversion
$
609,648
Hawai'i Metal Recycling (HMR)
2
Household Hazardous Waste
$
140,036
EnviroServices & Training Center
1
Outreach Education (including backyard composting and pilot program @ Keaau)
$
110,000
Recycle Hawaii
2
Diversion Grants
Used Residential Motor Oil Disposal Grant (operate 5 permanent drop -off centers)
1 $
paper
$
4,500
A &B Shredders
2
paper
$
80,000
Atlas Recycling Centers
2
paper
$
61,500
Business Services Hawaii
2
cooking oil
$
7,000
Hawaii BioFriendly
2
cooking oil
$
2200
Kahuna Farms
2
paper & cooking oil
$
2,800
Orchid Isle Rubbish & Recycle
2
paper
$
1,000
Puna Kamali'i
2
paper
$
1,250
Lance Tahara
2
paper
$
750
Tahara Shredders
1
Scrap Metal Disposal (Price Agreement -sum represents amount paid)
$
1,194,943
JBig Island Scrap Metal (BISM)
2
Used Tire Program
$
120,000
1 Big Island Scrap Metal (BISM)
1
State Grant Programs
EPA Waste Reduction /Recycling Projects
Glass Advanced Disposal Fee (ADF) Recycling Program
Round 1 (LT Strategic Plan & Keaau Project) completed 6130104
$ 390,000
Hawaii Island Economic
Development Board (HIEDB)
1
recycle glass
$
146,500
Atlas Recycling Centers
2
recycle lass
$
157,250
Business Services Hawaii
2
reuse glass containers
$
5,300
Club Shoyu
2
34
Used Residential Motor Oil Disposal Grant (operate 5 permanent drop -off centers)
1 $
61,205
1 Recycle Hawaii 1
Federal Grant Programs
EPA Waste Reduction /Recycling Projects
Round 1 (LT Strategic Plan & Keaau Project) completed 6130104
$ 390,000
Hawaii Island Economic
Development Board (HIEDB)
1
Round 2 (Commercial Recycling Strategies & Kealakehe Project) 2
year contract period from 1011103 thru 9130105
$ 213,500
Hawaii island Economic
Development Board (HIEDB)
1
Round 3 (North Hawaii recycling opportunities) 2
year contract period from 1011104 thru 9/30/06
$ -
Hawaii Island Economic
Development Board (HIEDB)
Round 4 (TBA)
$ -
TOTAL
34
Exhibit 1.4 Prepared by DEM
Parvrlinn Prnnrnm rnntrnrts fnr Fisral Year 2004 -05
State Grant Programs
Beverage Container Deposit Program
Contract Services (8 Certified Redemption Centers @ Transfer Stations)
# of contracts &
Description of Line Item
FY2005
Vendors
supplementals
Misc. Contract Services
1
Organic Waste
$ 1,195,000 Hawaii Metal Recycling (HMR)
2
Household Hazardous Waste
$ 145,000 EnviroServices & Trainin Center
lRecycle
1
Outreach Education (including computer recycling events & backyard composting)
$ 94,000 Hawaii
1
Diversion Grants
$ 126,500
paper
$ 4,000
A &B Shredders
3
paper
$ 143,000
Atlas Recycling Centers
3
paper & plastics
$ 128,000
Business Services Hawaii
2
cooking oil
$ 20,000
Hawaii BioFriendly
2
paper & cooking oil
$ 11,000
Orchid Isle Rubbish & Recycle
2
paper
$ 3,000
Puna Kamali'i
2
paper
$ 1,000
Lance Tahara
2
Recycling Centers @ Transfer Station (Keaau) includes $24,000 for paving
$ 166,648
Recycle Hawaii
2
Hawaii Island Economic
Recycling ReSycling Centers @ Transfer Station Kealakehe)
$ 30,000
Development Board (HIEDB)
1
Design of Materials Recovery Facility at WHSL
$ 120,000
DR Associates
1
Beverage Container Deposit Program (site prep at Hawi Transfer Station)
$ 7,140
ARC of Hilo
1
Scrap Metal Disposal (Price Agreement - sum represents amount paid)
$ 779,903
Big Island Scrap Metal (BISM)
3
Used Tire Program (Price Agreement- sum represent amount paid)
$ 40,402
Big Island Scrap Metal (BISM)
1
State Grant Programs
Beverage Container Deposit Program
Contract Services (8 Certified Redemption Centers @ Transfer Stations)
$ 160,000
JARC of Hilo
1
Bevera a Container Demo Program (Dec. 2004)
$ 3,000
1 Recycle Hawaii
1
Glass Advanced Disposal Fee (ADF) Recycling Program
recycle glass
$ 126,500
Atlas Recycling Centers
2
recycle glass
$ 126,500
Business Services Hawaii
2
reuse glass containers
$ 5,000
Club Sho u
2
beverage container demo outreach pro ect
$ 2,000
Recycle Hawaii
1
outreach & education on transition of ADF glass to HI 5 program
$ 20,000
ARC of Hilo
1
TV /cinema ads & si na a on transition of ADF glass to HI 5 program
$ 24,273
jOut of the Sea Media Arts
1
Used Residential Motor Oil Disposal Grant (operate 6 permanent drop -off centers)
$ 65,500
Recycle Hawaii 1
Big Island Biodiesel Production (OBEDT) - survey /reportieduc. & outreach
$ 6,000
C3 Consultants 1
Federal Grant Programs
EPA Waste Reduction/Recychng Projects
Round I (LT Strategic Plan & Keaau Project) completed 6130104
$ -
2 StFategies& Kealakehe PFGjest)
$ 2 3,max^^,
4
r°eURd (Ce.; memialResysl+f;g -
year
Round 3 (North Hawaii recycling opportunities) 2
year contract period from 1011104 thru 9 130106
1 $ 136,000
Hawaii Island Economic
Development Board (HIEDB)
1
Round 4 (TBA)
$
Other Grant Programs
Dell Grant Program (applied to Jan. 29, 2005 collection event in Kona)
$ 10,000
Recycle Hawaii
1
TOTAL
1
45
ISLAND -WIDE TRANSFER STATION CONDITION
® Some problems exist, but are minor in nature and can be
corrected without interrupting service.
O Serious problems exist, but can be corrected without
complete reconstruction.
• Serious failures are present in the facility. May require
complete reconstruction to correct.
Exhibit 1.5 Prepared by DEM SW
GO
CAUTION
STOP
KEAAU
0
PAHOA
is
KALAPANA
0
VOLCANO
40
GLENWOOD
�
HILO
0
HONOMU
�
PAPAIKOU
�
LAUPAHOEHOE
�
PAAU I LO
�
HONOKAA
�
PAHALA
�
KOHALA
0
PUAKO
�
WAIMEA
0
KAILUA
•
KEAUHOU
�
KEEI
0
WAI EA
�
MILOLII
�
WAIOHINU
�
® Some problems exist, but are minor in nature and can be
corrected without interrupting service.
O Serious problems exist, but can be corrected without
complete reconstruction.
• Serious failures are present in the facility. May require
complete reconstruction to correct.
Exhibit 1.5 Prepared by DEM SW
CONSTANCE R. KIRIU
County Clerk
June 21, 2006
+ZYMk
County of Hawai `i
Office of the County Clerk
25 Aupuni Street
Hilo, Hawai'i 96710
Telephone: (808) 961 -8155 Facsimile: (808) 961 -8911
Ms. Barbara Bell, Director
Department of Environmental Management
County of Hawaii
25 Aupuni Street, Room 210
Hilo, Hawaii 96720
Dear Ms. Bell,
WILLIAM E. SMITH
Deputy County Clerk
Enclosed for your review are two copies (numbers 1 and 2) of our confidential draft audit report,
Limited Scope Performance Audit of the Department of Environmental Management Recycle and
Diversion Grants Program for Fiscal years 2004 and 2005. If you choose to submit a written response
to our draft report, your comments will generally be included in the final report. We respectfully ask
that you inform our office by June 26, 2006 as to whether or not you intend to comment on our
recommendations. If you wish your comments to be included in the report, please submit your
response to us no later than 4:30 pm on Friday, June 30, 2006.
The Mayor, Managing Director, Department of Finance and State of Hawaii Department of Health
have also been provided copies of the confidential draft report.
Finally, since this report is still in draft form and changes may be made to it, access to this draft report
should be restricted to those assisting you in preparing your response. Public release of the final report
will be made by the Legislative Auditor's Office after the report is published in its final form.
Sincerely,
� a
William E. Smith
Deputy County Clerk
cc: Harry Kim, Mayor
Dixie Kaetsu, Managing Director
Department of Finance
State of Hawaii Department of Health
Hawaii County Is An Equal Opportunity Provider And Employer
Exhibit 1.6 Transmittal Letter to Departmental of EnvironmentaT Management
Harry Kim
Mayor
July 10, 2006
Nth OF H�
� ••� w
1.4
Barbara Bell
Director
'
+.p� o .�.
Nelson Ho
r�rE of MFr'�
Deputy Director
Gunk of 'Fttfutttt
DEPARTMENT OF ENVIRONMENTAL MANAGEMENT
25 Aupuni Street, Room 210 • Hilo, Hawaii 967204252
(808) 961 -8083 • Fax (808) 961 -8086
email: cohdemfto hawaii.hi.us
William E. Smith
Deputy County Clerk
25 Aupuni Street
Hilo HI 96720
Re: Audit of the County of Hawai`i's Recycling and Diversion Grants Program
Dear Mr. Smith,
a
rn
C-
C
C7
i
Thank you for your comprehensive review of the Department of Environmental Management's
Recycling and Diversion Grant Programs. Great attention was paid to our services and how they
may be performed better. It was also noted that the Department, being the newest in the County,
has had challenges with a lack of resources and history. We appreciate your effort to look
beneath the surface of the services we perform in the context of a highly regulated environment.
We hope that our comments clarify the issues, provide some history, and inform you about the
unique world of recycling and landfill diversion programs.
As we reviewed the draft audit, it became clear that many of the issues reflect the growing pains
of a new department. I think as you continued your journey through our contract files, you saw
progress as time went by. Experience is a great teacher and hindsight is a great vantage point for
learning even more.
We appreciate the opportunity to comment on this audit. It is a detailed and voluminous
document, and it is impossible to respond to all individual findings and recommendations in the
time allowed. Since the recommendations can generally be grouped into common areas of
concern across programs, we will comment on the broad issues. This response will focus on:
• The Integrated Solid Waste Management Plan
• Contract Management
• Procurement
• Regulations and Communications with the Department of Health
• Household Hazardous Waste Program
• Department Organization and Procedures
Hawaii County is an equal opportunity provider and employer.
Exhibit 1.7 Departmental Responses to the Recommendations
r-
M
-T1
YVi.S
I & I �
Mr. Bill Smith
Recycling and Diversion Grants Program Audit
Page 2
THE INTEGRATED SOLID WASTE MANAGEMENT PLAN
The Updated Integrated Solid Waste Management Plan
The original Integrated Solid Waste Management Plan (the Plan) was adopted by County
Council Resolution in 1994. The update to the Plan was begun in 2001, with a first draft given to
the County Council in April 2002. It was developed by community volunteers serving on a Solid
Waste Advisory Council (SWAC) with guidance from consultant Harding Lawson and the
Department of Environmental Management (the Department). The County's Environmental
Management Commission (EMC) ultimately became the SWAG The SWAC meetings were
held in conjunction with the monthly EMC meetings from July through December 2001. These
were publicly noticed meetings held in Hilo, Waimea, and Kona on a rotating basis. There were
also specific public meetings in August, 2002 solely to inform the public on the updated Plan.
There was an extraordinary amount of public input.
The updated Plan is meant as a general guidance document and is to be updated every five years.
Many plans sit on a shelf after they are accepted or adopted. That has not happened to this one.
While not everyone today agrees on the direction of the updated Plan, it was adopted by Council
on November 20, 2002 by Resolution No. 23 8 -02 by a unanimous vote of 9 ayes, and the
Department has worked diligently on implementation for the last four years. There has been
more progress in some areas than others; and some assumptions and policies have changed since
its adoption. Notable changes to what is included in the updated Plan are:
South Hilo Sanitary Landfill was expected to be closed by now. Instead we have
applied to the State Department of Health for an operating permit modification, to
steepen the slopes and extend the life of the landfill.
2. Trucking trash that could not be separated out of the waste stream from East Hawai' i
to West Hawaii has been tabled.
Both of these changes came about through public input and a lot of hard work. While the audit
states that the updated Plan has not been used to focus County resources in the most efficient
way, this is partly a result of inadequate financing and partly due to disagreement of the
County's policy making body, the Council, with the Plan. However, the County would have been
in even worse shape had there not been a document that we could disagree over, and could fine -
tune as time went along. The updated Plan, and the process used to create it, has been extremely
valuable.
The Next Update
The suggestion of adopting the next update by ordinance can be discussed with the Council. That
would focus more discussion on the front end, which could lead to more mutual understanding
and acceptance by both Council and administration on the goals to be pursued.
Funding will be requested for the next update in the FY 07 -08 budget cycle. By that time:
• The current Waste Reduction Facility RFP process will be completed;
• The Reload Facility should be constructed;
• The transfer stations will be in year three of the five -year upgrade plan; and
Mr. Bill Smith
Recycling and Diversion Grants Program Audit
Page 3
Recycling programs will have evolved.
That will be a good time for a new planning process, which takes dedication of time and
resources to produce a viable plan.
Transfer Stations
The audit states that "the County has not designated the upgrading of transfer stations as a high
budget priority." It further states that "The County needs to demonstrate its commitment by
implementing a viable solution for segregation, reduction, diversion and recycling of the
County's waste stream." We agree with a number of your conclusions.
It is agreed that there is much more to do at all our transfer stations, not just to show our
commitment, but to provide better services to our residents. The infrastructure needs of solid
waste and recycling programs are great. As is pointed out in the audit, the 1990s were a time
when the County worked very hard to keep status quo services and not lay anybody off. Times
were tough and there was little funding for infrastructure, no matter how great the need.
The Department has designated the upgrades of all transfer stations as a high budget priority.
This includes the country transfer stations as well as the Hilo transfer station. However, even
though such upgrades are of high priority to the Department, they compete for appropriation and
funding with other departments' capital projects and budget requests. When examined during the
budget process, they have not always been supported due to pressing needs in other areas such as
for improved roads and facilities. The planned Hilo Transfer Station upgrades and clean ups of
the scrap metal yard, greenwaste yard, and equipment maintenance facility are recognized as key
elements to management and diversion of solid waste in East Hawaii. The other 20 transfer
stations are on schedule with a five -year repair and enhancement program.
Thank you for noticing that much needs to be done. We look forward to working with the
Council for a long time to make these projects a reality.
CONTRACT MANAGEMENT
Contract File Policy and Procedures
In response to concerns raised in the audit, the Department has drafted written contract file
policies. Previously, verbal policies called for documenting major items of change and all
communications related to management of the program or contract. It is realized that the files are
not as complete as they should be. However, as more staff has been granted and some long-
standing programs have been stabilized, better documentation has been kept of key issues that
affect the program. The scrap metal recycling and green waste grinding for mulch were both
begun in the late 1990s. These programs have shown success in keeping these two large volume
and tonnage commodities out of the landfills. The fact that they were mandated by the State
Department of Health (DOH) meant that the County was required to begin these programs
without guidance or past experience on how to implement programs of this nature. The
Department's experience in these earlier programs enabled it to implement a more structured and
documented program for the Beverage Deposit Container Grant program.
Mr. Bill Smith
Recycling and Diversion Grants Program Audit
Page 4
The Department is evaluating all programs to implement improved procurement, management
and documentation where feasible. One example of the challenges faced relates to the
greenwaste program. The audit recommends that policies and procedures be established to
measure green waste inflow rather than just processed outflow. This can be accomplished by
setting a policy that requires every truck to weigh in. Unfortunately, at the green waste yard at
Kealakehe Transfer Station, the closest truck scales are two miles away and the truck owner with
incoming green waste is charged there for scaling. Then, incoming green waste may dry out in
the time it takes for the vendor to process it, especially for the older backlog that is at the site.
Incoming green waste may also contain contaminants that we prefer not to be ground or would
damage the grinder. These should be separated before weighing. Also, the tare weight of a
vehicle is not always accurately known so two trips to the scale might be required. Combined
with no room for truck scales at Kealakehe, as an operational decision and one of practicality, it
has been decided to only weigh the outflow processed green waste. It is also felt that it is better
to have consistent requirements at all of our locations.
Documentation for DiscretionarDecasions
It is agreed that documentation in files should provide a better history of the various programs
and could result in less potential liability for the County. The new contract file policy will
address this.
"Conflict of Interest" and "Related Par Transactions"
Language will be drafted to insert in contracts requiring stricter documentation of end use, with
weights shown on a scale ticket from a certified scale.
Contracts to be Executed in a Timely ashion
It is agreed that a better job can be done. Some of the challenges to timelier contract execution
are that the time required obtaining all necessary signatures and back -up documents, such as tax
clearance and insurance certificates of additional insured, can take many weeks or months.
Vendors often need the data from the last period of the fiscal year to reliably estimate what their
projections for the new fiscal year. These estimates can be difficult to project, especially with
new programs that have no prior history.
Additional Personnel
The Department was created through amendments to the County Charter in 2000. It was initially
established by carving out the solid waste and wastewater divisions from the Public Works
Department. These divisions did not have all the necessary positions required to run a
department. As a result, the Department has experienced some difficulties associated with
creating new positions and filling existing positions. In addition to the need for additional staff
to manage personnel, accounting and contracts, the Department has struggled with new EPA and
State mandates that have greatly increased workload. In light of the auditors concerns over
procurement practices, contract management and monitoring, the Department will evaluate the
need for additional personnel to undertake such tasks.
Site Visits and Documentation
Language will be inserted into any new contracts, or upon renewal of existing contracts,
requiring county personnel to be allowed on site to confirm that contractual conditions are being
met in an acceptable manner.
Mr. Bill Smith
Recycling and Diversion Grants Program Audit
Page 5
FRESH Accounting System
The FRESH system project accounting module will be researched to determine if it can be used
for program tracking. Other departments using this module will be consulted to see if this could
help DEM to better manage its contracts and projects.
Supplemental Contracts
Supplemental contracts are not always an indication of bad estimates for the scope of services.
With price term agreements like the green waste and scrap metal contracts where the quantities
can vary as well as the price on the scrap metal, encumbering smaller amounts periodically can
help to better manage the funds and the program.
PROCUREMENT
Grants
The Beverage Deposit Container Grant from the State is used to hire two full time Recycling
Specialists, conduct HI 5 promotions, with the remainder of the funding providing redemption
services at transfer stations. The applicants must meet the program guidelines and a formal
evaluation process is conducted on applications by an evaluation committee before making a
recommendation to the Director for an award. For Fiscal Year 06-07, the ARC of Hilo was
selected as the vendor.
The Used Motor Oil Grant from the state has a vendor that is selected through the professional
services list. The current vendor is Recycle Hawai' i as they are the only ones with expertise ,to
do this diversion in the county. On the other islands the funds are expended by the counties who
use the 10% administrative overhead to partially fund a Recycling Specialist who then
administers the used motor oil program.
How Have Diversion Program Grants Been Used?
Since the time the auditors raised questions about the application of the procurement code to
"grants ", the department has met with the Finance Director and Purchasing Agent to discuss this
matter. From the inception of these grants in Fiscal Year 1991, the county had been approving
them, believing that they were,covered under 103D- 102(b)(2)(A) as a grant provided by a county
ordinance, in this case the county budget ordinance. After reviewing the letter from the State
Procurement Office on this issue, the Department has sent a letter seeking clarification on the
matter (enclosed). In anticipation of a response, the Department is preparing to either: 1) seek an
exemption under the procurement code from the county's Chief Procurement Officer; or 2) draft
amendments to the County Code which not only provide for the diversion grants but also cover
grants from any department in addition to the current code provision for the $900,000 granted
through the budget to non - profits.
In or about FYI 991, the County Recycling Coordinator at that time received approval from the
Council for diversion grants to provide an incentive to recycle paper, used cooking oil, plastic
and bi -metal and divert such items from going into the landfills. When the Environmental
Management Department was created, the Department proceeded to create an application process
for diversion grants. Applicants are required to meet all program guidelines and provide
information on historic collection quantities and estimated collection quantities for the grant
Mr. Bill Smith
Recycling and Diversion Grants Program Audit
Page 6
year. A grant award results in a contract. The amount of the funds granted is based upon past
performance criteria, projected diversion quantities in the grant period and the amount of funding
available.
The Advanced Disposal Fee (ADF) Glass Grant from the state is used to fund the County ADF
Glass Diversion program, and applicants file a similar application to the Diversion Grant
Program. Funds are awarded based on past performance criteria, projected diversion quantities
in the grant period and the amount of funding available.
Emergency Trucking
The concluding question, whether "the emergency hauling [of greenwaste at Kealakehe] was
necessary due to insufficient or ineffective advertising" denies the basic problem with the green
waste facility in West Hawaii. Advertising would not be necessary if we had a better product, or
a correctly sized facility, or adequate funding in the past so that there wouldn't have been a
backlog of material. However, it is our policy to abide with all procurement rules and
occasionally mistakes are made. Earlier this year we instituted internal Department training to
better educate staff on proper procedures. Purchasing, Accounts, and Budget Divisions have
provided training already. Corporation Counsel and Civil Service are due to train staff soon.
REGULATIONS AND COMMUNICATIONS WITH DOH
Potential Permit Violations
The audit states that the County Code does not reflect the banning of green waste as required by
HAR 11- 58.1- 65(b). However, at this time the Department is meeting the State's diversion goals
for green waste. Also, there is ongoing evaluation of how more green waste and other organics
can be diverted from the waste stream, as this is considered an economical "best practice" for
solid waste management throughout the nation. While it is agreed that a total ban is ideal,
implementation of a ban will require further upgrades of all our transfer stations, additional
personnel, and may require additional contractual services.
Interpretation o State Statutes and Hawai `i Administrative Rules
Regarding the recommendation that County laws and documents be updated to be consistent
with the State ban on tires in landfills, in actuality, we are consistent at this time. Upon
consultation with the State there has been assurance that fire parts are legal to landfill. The
restriction is for whole tires. It is agreed that a ban on all parts of tires is desirable and is
supported. To that end, the existing County tire disposal contract was changed, covering those
tires generated through our Abandoned Vehicle Program, to require recycling of all of these tires.
An estimated 200 tons of tires per year are kept from the landfill with this relatively simple
change.
HOUSEHOLD HAZARDOUS WASTE PROGRAM
Purpose of Program
The audit seems to be incorrect in understanding the law regarding household hazardous waste.
HAR § 11 -261 -4 Exclusions. (b) states that "The following solid wastes are not hazardous
wastes: (1) Household waste, including household waste that has been collected, transported,
stored, treated disposed, recovered (e.g., refuse - derived fuel) or reused. `Household waste'
Mr. Bill Smith
Recycling and Diversion Grants Program Audit
Page 7
means any material (including garbage, trash and sanitary wastes in septic tanks) derived from
households (including single and multiple residences, hotels and motels, bunkhouses, ranger
stations, crew quarters, campgrounds, picnic grounds and day -use recreation areas)." Under the
law, residentially- generated household hazardous waste can legally go into a landfill. The
premise is that small quantities have a proportionally smaller impact than large commercially -
generated quantities. One -day collection events are held twice each year in Hilo and Kealakeke
because it is known that these substances can be dangerous, primarily to ground water, and it is
in the best interest of everyone to keep even small amounts out of our landfills. Those materials
collected are shipped to the proper permitted disposal or recycling facilities.
It is agreed that this program is ripe for expansion. Part of the planned transfer station upgrades
is to install ABOP collection centers (antifreeze, batteries, oil and paints). This will require
manning and gating of any transfer station that will become a collection center.
Diversion Rate Versus Landf ll Rate
It is not known if the EPA estimates of household hazardous waste generated per person are
accurate for this island. It is difficult to know the landfill diversion rate of the existing program
versus the landfill rate. It is expected that when disposal is more convenient, better data will be
available.
Permanent sites
It is agreed that permanent sites for household hazardous waste are needed and appropriate.
However, collections for commercial entities subsidized by taxpayers would be a departure from
the long- standing County policy of businesses being responsible for their waste. Hazardous
waste disposal is expensive and it is believed that County subsidization for only some businesses
sends the wrong signal to those businesses as well as taxpayers.
DEPARTMENT ORGANIZATION AND PROCEDURES
Risk Management
The audit recommends that the Department immediately transmit to the County Council as well
as the Mayor's office, Finance Department, and Corporation Counsel, all governmental
communication regarding possible violations. This is not felt to be practical due to the large
number of communications received from the DOH, most of which are not material in nature.
We have hundreds of permit compliance issues in our 35 Solid Waste Management Facility
Permits with DOH. We have other permits with DOH for Wastewater. These permits are
dependent on operations at facilities with infrastructure deficits, as well as sometimes short
staffing. It is agreed that communication lines need to be kept open, and it is also agreed that
communications regarding material issues will be transmitted to the Council and the Mayor's
Office.
Department Background
The Department of Environmental Management was officially established in December 2000.
However, as noted in the audit, permanent staff was not on board until August 2002. It is
noteworthy that the general public understood that Public Works was overloaded and that
wastewater and solid waste deserved more attention, as it was a change to the County Charter by
popular vote that created the Department. There was an Acting Director from September 2001
Mr. Bill Smith
Recycling and Diversion Grants Program Audit
Page 8
through July 2002. I was hired as Director in August 2002, and am now almost four years into
the project of making a new department out of two divisions.
The Department was created when the County's finances were not adequate. In addition, the
audit notes the particular challenges of having had four Solid Waste Division Chiefs since 2001.
The Business Services Section has been created, bringing all the accountants for solid waste and
wastewater operations together in one location. The consolidation of similar functions into one
Section, located together, has helped with back up amongst the staff and provided better
customer service. This consolidation coincided with the County's new FRESH financial
management system, and the FRESH conversion alone was a huge project.
The Technical Services Section was created by transferring two engineering positions from
Wastewater Division. They joined the Chief of the Technical Services Section to provide
services for both the Wastewater and Solid Waste Divisions, This Section is responsible for all
Department CIP projects so that the Department can coordinate more easily. This Section is
extremely productive and has provided a small team for large projects, providing some depth that
was previously non - existent.
Of the approximately 180 employees in the Department, the great majority (51 in Wastewater
and 109 in Solid Waste) are involved in 7 day /week, 365 day /year operations. We often re-
evaluate what will provide the best coverage of our requirements, as well as service to our
customers.
Transfer Station Personnel
A training manual was developed in 2004 for the security guards at our 21 transfer stations. Two
trainings were held in 2004, two in 2005. Two trainings have been held so far in 2006, with
more planned this year as new security personnel are assigned to the transfer stations. Previous
training was not consistent and earlier there had not been a manual for personnel to consult.
While we find this has helped provide better customer service with our contracted security guard
services, the preference is to have only County employees at the transfer stations. Our analysis
shows that it would be cost effective by eliminating duplication of labor force in many instances,
and that it would provide even better customer service.
Government Grant Funding
The opportunities for government grant funding have not been missed. The example that Hawaii
Island Economic Development Board (HIEDB) "applied" to EPA and received $500,000 while
we didn't even try is inaccurate. When HIEDB was awarded the first of this series of four grants,
our EPA liaison was asked how the County could go about getting this type of grant. The answer
was to go through our Congressional delegation because if we applied for any of the competitive
grants, the maximum award was around $200,000. Since HIEDB was able to build on their very
successful relationship and history with our Congressional legislators to provide grant money for
a very specific need, upgrading our rural transfer stations and creating models for community
recycling centers, it was decided that the best plan was to work with HIEDB. The County has
worked hand in hand with HIEDB on all four years of these grants, providing technical
assistance, and in the first three years, was the legal entity responsible for the funding.
Mr. Bill Smith
Recycling and Diversion Grants Program Audit
Page 9
Process Mapping
The idea of hiring a consultant for process map development is wonderful. There is agreement
with much of the overall evaluation of the Department. We have worked diligently to improve
the two Divisions, create a Department, and provide a cohesive work environment. Since we
have not achieved as much as we would have liked, the assistance would be much appreciated.
Council support for hiring such a consultant would be appreciated.
CONCLUSION
As stated in the beginning, we have not attempted to address all of the findings and
recommendations contained in the audit, but instead have focused on some of the major areas
where shortcomings were found. We are willing to provide further information or comments on
any areas not addressed above upon request.
It is hoped that the above information is helpful to you, and it helps you to understand some of
the challenges a little better. Again, I truly appreciate your willingness to dig deep into our
programs to see how you could offer the best kind of criticism; the kind that we could use to
improve. Please let me know if I can be of further service.
Sincerely,
Barbara Bell
DIRECTOR
cc: Mayor
County Solid Waste Division
Corporation Counsel
County Council Chair
enclosures
Harry Kim
Mayor
June 20, 2006
Barbara Bell
Director
Nielson Ho
Deputy Director
X1111untV of
DEPARTMENT OF ENVIRONMENTAL MANAGEMENT r- I -
25 Aupuni Street, Room 210 + Hilo, Hawa'i'i 967204252
(808) 9614083 • Fax (808) 961 -8086 Q
email-, hdem hawaii.hi.0
'r r
Mr. Aaron S. Fujioka, Administrator
State Procurement Office
P. O. Box 119
Honolulu, HI 96810 -0119
Re: Grants and Landfill Diversion Program
Dear Mr. Fujioka,
.. =
We are nearing the beginning of the new fiscal year and would like your advice on whether our
current landfill diversion program process is acceptable.
The Solid Waste Management hierarchy, as laid out in HRS 342G, prioritizes the use of solid
waste management practices and processing methods as follows:
1. Source reduction;
2. Recycling and bioconversion, including composting; and
3. Landfllling and incineration.
In following these priorities, the County developed a program to divert recyclable commodities
from landfilling. In our line -item budget this program is named "Diversion Grants ". This
program has been in place since 1992 and I believe the process has been similar throughout these
years. The funding has grown from approximately $135,000 in FY 1992 to the current $650,000
for FY 2007. There are presently ten vendors participating in the Diversion Grant Program at
this time. Some participate with multiple commodities; some participate with one single
commodity.
Notification consists of a published notice in both daily newspapers for Hawaii County. The
notices (enclosed) lay out basic information regarding the program and designate the contact
points for more information. Interested vendors are instructed to pick up the Guidelines packet
(enclosed) and to submit the application that is contained in the packet. The County Department
of Environmental Management, Solid Waste Division, reviews the applications, confirming the
vendors have complied with all requirements and are qualified to perform the services.
We then assess quantities of the various diversion grant items that will reasonably be invoiced
through the year and set maximums, by contract, for each vendor. The fiscal year is divided into
Hawa''i County is an equal opportunity provider and employer.
Ig33
two periods to allow for better estimates from vendors as they go through the year and to allow
us to redistribute any Rinds that may not have been used in the first half of the year.
Though the funds are appropriated through the annual County Council budget ordinance, a
recipient or provider is not identified in the budget process.
If the process as outlined here, and shown in the enclosed documents, does not sufficiently meet
State procurement criteria, we would appreciate hearing from you as soon as possible as your
response may require that we ask for an exemption from the relevant portions of HRS Chapter
103D through our County Chief Procurement Officer.
Please let me know if you need clarification or have further questions. I can be reached at 808-
961 -8083 or bbell(a7co.hawati.hi.us. Thank you for your prompt attention to this request.
Sincerely,
Barbara Bell
DIRECTOR
M. County Solid Waste Division
Finance Director
Corporation Counsel
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DIVERSION GRANT PROGRAM GUIDELINES FY 2005 -2006
DEPARTMENT OF ENVIRONMENTAL MANAGEMENT
COUNTY OF HAWAII
BACKGROUND
The County of Hawaii operates two municipal solid waste landfills that received
approximately 230,000 tons of solid waste last year. In 1991, the State legislature passed Act
324, codified as Chapter 342G Hawai'i Revised Statutes, requiring that each County in the State
have a goal to divert 25% of the waste stream by 1995, and 50% by the year 2000. In 2002,
The County adopted an Update to the Integrated Solid Waste Management Plan to accomplish
the State mandate.
The County Department of Environmental Management, through the Solid Waste
Division is continuing the Recycling Diversion Grant Program to provide an incentive for the
diversion of designated products to recycle or re -use markets. Through this program, grants will
be awarded to businesses that divert material, which is stipulated within this document, to on-
island or off - island recycle or re -use end markets. Grants will be based on reported amounts of
material diverted from either County landfill. Contracts will be awarded on a semi - annual basis
with quarterly payments based on approved invoices. The County reserves the right to
terminate or revise the program at any time if it is determined by the County to be in the best
interest of the County.
Each semi - annual period will be defined as July to December (1St period) and January to
June (2 "0 period).
To reach the goals set by the State, the County of Hawaii looks to local waste haulers,
recyclers, businesses, and non- profit organizations to minimize the waste being landfilled.
Through education, contracts, and this grant program, the County is hoping to reduce the
amount of waste being landfilled, while providing incentives for developing markets for the
diverted material.
Revised 1212005
INTRODUCTION
Enclosed with these guidelines is an application form, which needs to be completed and
approved prior to award of any contract. Also enclosed are a SAMPLE Diversion Grant
Agreement and a SAMPLE Diversion Grant Claim Form (Exhibits i & 11). A total amount of
$650,000 is allotted for this fiscal year 2006 -2006. A maximum amount per semi - annual period
of $325,000 will be made available for all Grantees or businesses that have a general excise tax
license and will be paid out on a first claim basis until the contracted allotment of funds for each
Grantee is exhausted. This amount does not imply that the total sum is designated per person
or business. No more than one -half (112) of the semi - annual allotment for a specific diverted
commodity may be awarded to any single Grantee through the application process. The grants
will be awarded for the following qualifying commodities at a rate of $40 per ton of recycled
paper fiber; $160 per ton of recyclable plastics; $80 per ton of mixed recyclables including paper
fibers and plastics; $60 per ton of recycled Fats, Oils and Greases (FOGS); and $500 per ton of
used latex paint that is diverted from the County landfills directly to a re -use or recycling end
market. Awards may also include an additional financial per pound incentive for the provision of
collection bins /services at a permitted County solid waste management facility. Required
documentation showing proof of the sources of the materials collected for diversion and that the
material was directly diverted to an on- island or off - island recycle or re -use end market is
mandatory.
These guidelines describe:
• Funding eligibility and how to apply,
Documentation required to complete the application, and
• Procedures and criteria for evaluating diversion grant recipients.
Revised 12/2005 2
Applicants should understand these guidelines before completing the agreement.
Additional inquiries relating to the County's Diversion Grant Program may be addressed to
Eileen O'Hora -Weir, Recycling Program Coordinator, Solid Waste Division, Department of
Environmental Management at 961 -8942. Oral instruction and/or explanations are not binding
on the County. Written inquiries should be addressed as follows:
County of Hawai'i
Department of Environmental Management
Solid Waste Division c/o Recycle Coordinator
108 Railroad Ave
Hilo, Hawai'i 96720
FUNDING LEVELS FOR DIVERSION GRANTS
Grants will be awarded at the rate of $40 per ton of qualifying paper fibers (semi - annual
maximum of $240,000 in total paper grants), $160 per ton of recyclable plastics (semi - annual
maximum of $10,000 in total plastic grants), $80 per ton of mixed recyclables (semi - annual
maximum of $25,000 in total mixed recyclables grants), $60 per ton of recycled FOGs (semi-
annual maximum of $15,000 in total FOGs grants), $500 per ton of used latex paint recycling
(semi - annual maximum of $5,000 in total used latex paint recycling grants) for material
stipulated within this documentation. An additional monthly incentive will be paid to a vendor
providing collection bins /services for paper fibers, plastics, and/or mixed recyclables at a
permitted County solid waste management facility (semi - annual maximum of $30,000 for
collection incentive grants). Any single eligible party may apply for up to one -half (1/2) of the
total semi - annual allotment available for each recycled commodity under this program. To be
eligible for payment, a Grantee must show proof that material stipulated within this document
has been directly diverted to an on- island or off - island recycle or re -use end market. The
County reserves the right to revise or terminate the program at any time, if it is in the best
interest of the County.
Revised 12/2005 3
ELIGIBILITY
All applicants must have completed an application form and have received an executed
Grant Agreement from the County. Applicants must submit an accurate and complete Diversion
Grant Claim Form and must also submit copies of the certified weight scale tickets, a bills of
lading for the material sent and/or proof of acceptance by a re -use or recycling end market or
State of Hawai'i Department of Health certified FOGs reprocessing facility. For materials
collected at permitted County solid waste management facilities, applicants must provide a
monthly loa identifying the dates and weight of each container removed from the site,
accompanied by certified weight scale ticket and description of materials collected. In the event
more than one vendor applies to provide collection services at a single permitted County solid
waste management facility, the County reserves the right to select one vendor to service each
location based on proposed collection schedules and the size /design of the vendor's collection
bins relative to available space and anticipated collection volumes. Vendors providing collection
services for recyclables at permitted County solid waste management facilities will assume
liability for those collections and be required to service the collection bins in a reliable and safe
manner. The County reserves the right to cancel the Agreement if it is determined that the
vendor has failed to maintain their collection bins. If the applicant meets the minimum eligibility
criteria, the quarterly payment will be determined according to certified weight scales receipt
consistent with the number of pounds reported. The quarters will be defined as July to
September (15t), October to December (2 "d), January to March (P), and April to June (4th).
ELIGIBLE PARTIES
Any business, partnership, corporation, or non - profit organization is eligible to apply for
diversion grants. Said entity must have a General Excise Tax number with the State of Hawai'i.
Revised 1212005 4
ELIGIBLE MATERIAL
Forty Dollars ($40) per ton will be awarded for any grade of paper or cardboard, One
Hundred -Sixty Dollars ($160) per ton will be awarded for recyclable plastic, Eighty Dollars ($80)
per ton will be awarded for mixed recyclables including paper fiber and plastics, Sixty Dollars
($60) per ton will be awarded for recycled FOGs, and Five Hundred Dollars ($500) per ton will
be awarded for used latex paint diverted from the County's Landfills to a re -use or recycling end
market on- island or off - island. The collection of paper fibers, plastics, or mixed recyclables
including both paper fibers and plastics at any permitted County solid waste management
facility will also be awarded grant funds to offset the costs of collection and transport.
QUALIFICATION OF APPLICANTS
All applicants having an Account Receivable with the County of Hawaii, Department of
Environmental Management, shall be current and in good standing on that account.
APPLICATION FORM AND CRITERIA FOR APPROVAL
All interested parties must complete an application form (attached) and provide
appropriate documentation. Applicants shall also submit information on prior experience and
technical capability to operate a diversion recycling /reuse program. A list of prospective buyers
and end markets for each specified item shall accompany the application. Additionally,
applicants proposing to collect materials at permitted County solid waste management facilities
must submit a description of the proposed collection bin, a site layout for each facility indicating
area where collection bin(s) will be situated, a general description of proposed services
including frequency of on -site service, signage, and other details pertaining to operations.
Participants will also be required to provide proof of insurance policies naming the County as
additionally insured, for the duration of the agreement, in the following coverage and amounts:
Revised 1212005 5
a) Automobile Liability Insurance, with minimum limits of not less than Three
Hundred Thousand Dollars ($300,000) for bodily injury or death per
person and not less than Fifty Thousand Dollars ($50,000) per
occurrence for property damage.
b) General Liability Insurance, with minimum limits of not less than Three
Hundred Thousand Dollars ($300,000) for bodily injury or death per
person and not less than Fifty Thousand Dollars ($50,000) per
occurrence for property damage.
CONTRACTS
The County will not review an Applicant's claim form until a semi - annual agreement
exists between the Applicant and the County. The County reserves the right not to award any
grant for which submitted back -up documentation or reporting is not complete. The County also
reserves the right not to pay on documentation that is dated after the last working day of the
semi - annual contract period. Semi - annual contracts must be signed, dated, notarized, and
turned in by the applicant within 90 days of the first day of the first and third quarters of Fiscal
Year 05 -06. In the event of any delay beyond the control of the County or Grantee, the County,
at its sole discretion, may extend the agreement in the amount equal to the period of said delay.
If no reimbursement requests are received within thirty (30) calendar days after the end
of each quarter, the County reserves the right to close the contract. Any fund balance of
undistributed semi - annual allotments may be carried over to the following semi - annual period of
the same fiscal year. The County reserves the right to carry over any semi- annual balances or
increase semi- annual allotments should funds become available.
CLAIM REPORTS
Included in this packet is a Diversion Grant Claim Form (Exhibit I for paper fibers, Exhibit
11 for plastics and/or FOGs, Exhibit III for mixed recyclables and/or used latex paint, and Exhibit
Revised 1212005 6
IV for provision of collection services at permitted County solid waste management facilities)
that must be signed & submitted quarterly along with the appropriate documentation on the
source(s) of the collected, diverted materials, bill(s) of lading, certified weight scale tickets, and
documentation of purchase from buyer(s). The included Diversion Grant Claim Forms
supersede all others, all previous versions of the Diversion Grant Claim Forms are no longer
acceptable; please make sure that you have the current Diversion Grant Claim Forms when
submitting your quarterly claims. Eligible parties applying for Diversion Grants are responsible
for providing complete information to the County on a Diversion Grant Claim Form.
Records of the material reported must be kept by each applicant and a certified copy
submitted to the County with the signed original quarterly Diversion Grant Claim Form.
Documentation must include copies of an accounting of the amounts & source(s) of the
diversion materials, the sale and weight scale receipts which detail the type and weight of
recycled material transferred to a recycle or re -use end market, the collector, the processor or
converter purchasing or accepting the materials, and the date of the transaction. For materials
collected at permitted County solid waste management facilities, applicants must provide a
monthly log identifying the dates and weight of each container removed from the site, number
and contents of each container removed from the site, and certified weight scale tickets for each
container removed from the site. Tracking of materials collected at permitted County solid
waste management facilities must account for the total tonnage from point of collection to final
on- island or off - island end use /market. All documentation must be signed by authorized
personnel.
All grant recipients must maintain all original receipts and records for a minimum of three
years following the grant period and all such receipts and records are subject to inspection by
the County.
Names, mailing addresses and service addresses of customers of the diversion grant
claimants are subject to the disclosure limitations in Section 92F, Hawaii Revised Statutes as
Revised 1212005 7
disclosure could cause substantial harm to the competitive position of the claimant from whom
the information was obtained.
PAYMENT
The County intends to make payments on eligible grant diversions no later than 30 days
after receipt of the signed original quarterly claim form applications. Applicant must attach all
necessary documentation including certified weight scale tickets, proof of acceptance by re -use
or recycle market, applicable bills of lading and/or summary sheets with their invoices.
Grantee's requests and payments shall be made on a quarterly basis. Total payments
shall not exceed semi - annual estimated totals. If all funds encumbered are not used, each
semi - annual contract will be closed and unused funds will lapse and may be carried forward to
the following semi - annual period for further use.
If the Grantee's total semi - annual payment requests are greater than the amount
encumbered per Grantee's contract, the Grantee may submit payment requests for the
difference in the following semi - annual period, depending on availability of funds. During any
semi - annual period a Grantee's request shall not exceed one -half (112) of the total semi- annual
allotment for the program unless an addendum to contract has been properly executed and
approved by the Director.
The County will review the claim forms and documentation to determine whether the
amount of material listed will qualify for diversion grant payments. If conflicts arise within the
submitted documentation, the Grantee will be informed of the error. If there is an accounting
error in the submitted claim forms or supporting documentation the County shall make an
appropriate correction, however in cases of missing, incorrect or incomplete submissions the
claimant will be required to re- submit the corrected applicable documents. Correction to
applications or documentation must be returned to the Solid waste Division within ten (10)
calendar days from the postmark date on the County's request for correction. Corrections
Revised 1212005 8
received by the County after the above stated correction period elapses will be rejected unless
otherwise approved in writing by the County.
TAX CLEARANCE
For contracts $25,000 and over, the grantee/bidder/applicant, before entering into a
contract with the County of Hawaii, will be required to provide the County with a current original
Federal and State tax clearance certificate from the State Director of Taxation and the Internal
Revenue Service to the effect that all delinquent taxes levied or accrued under Federal and
State statutes against said person, firm or corporation have been paid, and any other evidence
requested by and acceptable to the contracting officer to demonstrate that the prospective
bidder is not in default of any obligations due to the Federal or State government or any of its
political subdivisions. The tax clearance must be valid on the date the contract is signed by the
Grantee and shall remain current during the entire grant period. A tax clearance is valid for six
(6) months after date of issuance.
The final payment on this contract shall not be settled until the Grantee obtains receipt of
a current tax clearance from the Department of Taxation to the effect that all delinquent taxes
levied or accrued under State statutes against the Grantee have been paid.
AUDITS
Grant recipients are 'subject to audit by the County to assure that the grant activities
were in accordance with the terms of the Grant Agreement and the Diversion Grant Form.
If a grant recipient is found to have falsified documentation, the Grantee will be
responsible to return to the County all grant money received with 15% interest, compounded
daily, from the time the Grantee received the money. Non - return of grant money obtained under
falsified documents within 10 days of notification will cause the County to turn over collection to
an established private collection agency.
Revised 12/2005 9
The County may turn all such matters over to the Prosecutor's Office for investigation
and prosecution of fraud. The Solid Waste Division will encourage pursuit of maximum
penalties in all cases where indictments, relative to falsifying information related to this program,
are reached.
QUESTIONS
Any explanation desired by an applicant regarding the meaning or interpretation
of this solicitation must be requested in writing and with sufficient time allowed for the County's
reply to reach all prospective applicants before the submissions of their application. Oral
explanations or instructions will not be binding. The address to send all such correspondence
is:
County of Hawai'i
Department of Environmental Management
Solid Waste Division c/o Recycle Coordinator
108 Railroad Ave
Hilo, Hawaii 96720
Grant claim forms and attached documentation should be submitted to the same address by
required deadlines.
Revised 1212005 10
Business Name:
Contact Person:
Business Address:
COUNTY OF HAWAI`l
DEPARTMENT OF ENVIRONMENTAL MANAGEMENT
APPLICATION FOR DIVERSION GRANT PROGRAM
FISCAL YEAR 2005 -2006
Bus. Ph..
No. and StreetCity State
State of Hawaii General Excise Tax License Number:
Owners and Officers:
Name Residence Address Position
Number of years in business in Hawaii:
Zip Code
Percentage of
Ownership
SECTION l
Amount of product recycled to an on- island or off- island markets for:
FY 04 -05 (if applicable) Estimate for FY 05 -06
Ledger & Mixed Paper:
Newspaper:
Cardboard:
Plastics
Mixed Recyclables:
Fats, Oils & Greases:
Used Latex Paint:
lbs.
lbs.
lbs.
lbs.
lbs.
lbs.
lbs.
lbs.
lbs.
lbs.
lbs.
lbs.
lbs.
lbs.
SECTION II
If applying to provide collection services for paper fibers, plastics, and/or mixed
recyclables (paper fibers and plastics) at permitted County solid waste management
facilities, complete the section below. Attach additional sheets if proposing to collect
more than one commodity at a facility. Check the facility you propose to service,
describe the commodity you propose to collect, and provide the collection bin rate you
propose to provide these services. Attach proposed operations plan, collection bin
dimensions /description, and site layout indicating where collection bin will be situated.
Revised 12/2005 11
Transfer Station
Hilo
Papaikou
Honomu
Laupahoehoe
Paauilo
Honokaa
Waimea
Hawi
Puako
Kealakehe
Keauhou
Keei
Waiea
Waiohinu
Pahala
Volcano
Glenwood
Keaau
Pahoa
Kalapana
Type of Collection(s) Proposed Monthly Award for Collections
$
$
$
$
Describe proposed operations at permitted County solid waste management facilities
including frequency of service, anticipated containers needed per site per month,
location, and language for signage, and proposed site location for collection bin(s) at
each facility. Attach additional sheets and site layout plan as necessary to describe
proposed services.
Facility Plot Plan and Collection Bin Location:
Revised 1212005 12
Signature of Owner /Officer
Signature of Owner /Officer
Print Name & Title
Date
Approved:
Director Date
Revised 1212005 13
DATE:
CLAIMANT:
PAPER FIBERS
COUNTY OF HAWAI'I DIVERSION GRANT CLAIM FORM
Department of Environmental Management, Solid Waste Division
CLAIM PERIOD:
GENERAL EXCISE TAX NUMBER:
MAILING ADDRESS:
TOTAL QUARTERLY
MATERIAL DIVERTED
Newspaper
Cardboard
Ledger Paper
(PLEASE PRINT)
EXHIBIT I
TONS SOURCE(S) END USA
(If multiple sources and/or end uses, please attach spreadsheet)
Mixed Paper
TOTAL TONNAGE x $40
(Grant Due)
INFORMATION ON BUYER(S): If more than one buyer, please attach a separate sheet
with the following information provided for each buyer.
NAME OF BUYER:
ADDRESS:
MATERIAL(S) PURCHASED: TONS:
CONTACT PERSON:
PHONE NUMBER:
CLAIMANT SIGNATURE
Required documentation for confirmation must accompany this form.
Revised 1212005 14
PLASTICS & FATS, OILS AND GREASES (FOGs)
COUNTY OF HAWAII DIVERSION GRANT CLAIM FORM
Department of Environmental Management, Solid Waste Division
DATE:
CLAIMANT:
GENERAL EXCISE TAX NUMBER:
MAILING ADDRESS:
CLAIM PERIOD:
(PLEASE PRINT)
EXHIBIT II
TOTAL QUARTERLY
MATERIAL DIVERTED TONS SOURCE(S) END USES
(if multiple sources and/or end uses, please attach spreadsheet)
PLASTIC (indicate type(s) i.e. #1; #2; Mixed #1 & #2)
(Type)
(Type)
(Type)
TOTAL PLASTIC TONNAGE
TOTAL QUARTERLY
MATERIAL DIVERTED
FOGS
TOTAL FOGS TONNAGE
x$160 =
(Grant Due)
TONS SOURCE(S) END US
(If multiple sources and/or end uses, please attach spreadsheet)
X $60 =
(Grant Due)
TOTAL QUARTERLY GRANT (PLASTICS & FOGs) AMOUNT DUE $
INFORMATION ON BUYER(S): If more than one buyer, please attach a separate sheet
with the following information provided for each buyer.
NAME OF BUYER:
ADDRESS:
MATERIAL(S) PURCHASED:
CONTACT PERSON:
PHONE NUMBER:
CLAIMANT SIGNATURE
TONS:
Required documentation for confirmation must accompany this form.
Revised 1212005
MIXED RECYCLABLES & USED LATEX PAINT EXHIBIT III
COUNTY OF HAWAII DIVERSION GRANT CLAIM FORM
Department of Environmental Management, Solid Waste Division
DATE:
CLAIMANT:
GENERAL EXCISE TAX NUMBER:
MAILING ADDRESS:
CLAIM PERIOD:
(PLEASE PRINT)
TOTAL QUARTERLY
MATERIAL DIVERTED TONS SOURCES END USE (S)
(If multiple sources and/or end uses, please attach spreadsheet)
MIXED RECYCLABLES (Indicate type of mixed commodities i.e plastics & paper)
(Type)
(Type)
(Type)
TOTAL MIXED RECYCLABLE TONNAGE
X$80=
(Grant Due)
TOTAL QUARTERLY
MATERIAL DIVERTED TONS SOURCE(S) END USE(S)
(If multiple sources and /or end uses, please attach spreadsheet)
Used Latex Paint
TOTAL PAINT TONNAGE
x $500 =
(Grant Due)
TOTAL QUARTERLY GRANT (MIXED RECYCLABLES & PAINT) AMOUNT DUE $
INFORMATION ON BUYER(S): If more than one buyer, please attach a separate sheet
with the following information provided for each buyer.
NAME OF BUYER:
ADDRESS:
MATERIAL(S) PURCHASED: TONS:
CONTACT PERSON:
PHONE NUMBER:
CLAIMANT SIGNATURE
Required documentation for confirmation must accompany this form.
Revised 1212005 16
COLLECTION AT PERMITTED COUNTY FACILITIES EXHIBIT IV
COUNTY OF HAWAII DIVERSION GRANT CLAIM FORM
Department of Environmental Management, Solid Waste Division
DATE:
CLAIMANT:
GENERAL EXCISE TAX NUMBER:
MAILING ADDRESS:
CLAIM PERIOD:
(PLEASE PRINT)
Transfer Station
# /Collection Bins Month! AI ward_ x # /Months =
Total
Hilo
$
Papaikou
$
$
Honomu
$
$
Laupahoehoe
$
$
Paauilo
$
$
Honokaa
$
$
Waimea
$
$
Hawi
$
$
Puako
-
$
$
Kealakehe
$
$
Keauhou
$
$
Keei
$
$
Waiea
$
$
Waiohinu
$
Pahala
$
Volcano
$
Glenwood
$
$
Keaau
$
$
Pahoa
_
$
$
Kalapana
$
$
TOTAL # of CONTAINERS TOTAL AWARD DUE $
TOTAL TONNAGE COLLECTED AT PERMITTED COUNTY FACILITIES:
CONTACT PERSON:
PHONE NUMBER:
CLAIMANT SIGNATURE
Required documentation for confirmation must accompany this form.
Revised 1212005 17
SAMPLE AGREEMENT
DIVERSION GRANT PROGRAM FY 2005 -2006
THIS AGREEMENT, made and entered into this
day of
2005, by and between
AGREED GRANTEE and the COUNTY OF HAWAI'I a municipal corporation, by HARRY KIM,
its Mayor, AGREED GRANTOR.
WITNESSETH:
That for and in consideration of the payments hereinafter provided, the Agreed Grantee
and the Agreed Grantor hereby agree to enter into a Grant Agreement to pay the Grantee
FORTY AND NO/100 DOLLARS ($40.00) PER TON for paper fibers (computer, white or
colored ledger paper, cardboard, newspaper, boxboard and all other paper not previously
described); ONE HUNDRED SIXTY AND N01100 DOLLARS ($160.00) PER TON for recyclable
plastics; EIGHTY AND NOI100 DOLLARS ($80.00) PER TON for mixed recyclables which are
composed of commingled paper fibers and plastics collected at permitted County of Hawai'i
solid waste management convenience centers; SIXTY AND N01100 DOLLARS ($60) PER TON
for recycled Fats, Oils and Greases (FOGs); FIVE HUNDRED AND NO /100 DOLLARS ($500)
PER TON for used latex paint which has been re -used or recycled to an on- island or off - island
end use market. Additionally, the Agreed Grantor will pay the Grantee to provide collection and
transport services for specified recyclables at permitted County solid waste management
facilities as identified in Attachment A of this Agreement. Claims must be requested within the
specified time limit and with the specified forms and documentation stipulated in the Diversion
Grant Program Guidelines FY 2005 -2006 which are previously approved and made a part
hereof and available for inspection with the - Solid Waste Division of the Department of
Environmental Management. The total grant provided to the Agreed Grantee for the semi-
Revised 1212005 18
annual period of
shall not exceed
Furthermore, of the total amount awarded, $ shall be provided to the Agreed Grantee for
the collection of paper fibers, $ shall be provided to the Agreed Grantee for the collection
of plastics, $ shall be provided to the Agreed Grantee for the collection of mixed
recyclabies, $ shall be provided to the Agreed Grantee for the collection of FOGS, $
shall be provided to the Agreed Grantee for the collection of used latex paints, and $
shall be provided to the Agreed Grantee for the provision of collection bins /services
per the terms and conditions stipulated in Attachment A.
Any revision to the grant amount shall not be valid unless a certification of availability of
funds is issued by the Finance Director.
And in consideration of the payment the Agreed Grantee, or his authorized
representative, the undersigned, certifies that all claims made are true and the requirements of
the Diversion Grant Program summarized in the Guidelines have been fully met. That for
contracts of $25,000.00 or greater, said requirements include a receipt of a current State and
Federal Tax Clearance Certificate for the Director of Taxation as a prerequisite to acceptance of
this contract, and another tax clearance before final payment is made under this contract. The
Agreed Grantee agrees to grant the County of Hawaii access to those records needed to verify
the information provided in the connection with this application procedure. Also, the Agreed
Grantee will repay the County all grant money received with 15% interest, compounded daily,
from the time the Grantee received the money if the County can prove by a preponderance of
evidence that the grant documentation was falsified and claims were untrue.
Furthermore, it is understood that the Agreed Grantee shall be responsible for being fully
informed of all federal, state, and county laws, ordinances, rules, and regulations which in any
manner affect this Agreement and the performance thereof. During the performance of this
Revised 1212005 19
contract, the Agreed Grantee shall not discriminate against any employee or applicant for
employment because of race, color, religion, sex or national origin; likewise, for treatment of the
employee during his/her employment. Notice setting forth the provisions of the non-
discrimination clause, furnished by the Agreed Grantor shall be posted in conspicuous places by
the Agreed Grantee. Non - compliance may lead to cancellation or suspension of this contract or
declaration of ineligibility on future contracts.
It is understood that the Agreed Grantee states that the Grantee, its officers, agents and
employees are independent contractors and not employees of the County of Hawaii.
Furthermore, the Agreed Grantee shall indemnify and hold harmless the County of Hawai'i, the
appropriating contracting agency, the involved officers, employees and agents from and against
all claims, damages or costs arising out of or in connection with the acts or omissions of the
Grantee.
It is understood and agreed that any services to be provided in accordance with the
terms of this contract may be terminated immediately, in whole or in part, upon finding by the
County or any court of competent jurisdiction that these services must be provided by public
employees, pursuant to Civil Service or other law. it is further understood, that should such a
finding be made, the County will not be liable under this contract for any resulting damages, and
such a termination will not be considered a breach of this contract.
For and in consideration of the agreements of the Agreed Grantor herein and upon the
full and faithful performance thereof by the Agreed Grantee or its legal representative, the
Agreed Grantor hereby agrees to pay the Agreed Grantee, or its legal representative, in lawful
money of the United States of America.
IN WITNESS WHEREOF, the Agreed Grantee has caused this agreement to be
executed on its behalf by , its
, and the Agreed Grantor has caused this
agreement to be executed on its behalf by HARRY KIM, its Mayor, at Hilo, Hawai'i, State of
Hawai'i, as of the day and year first above written.
Revised 12/2005 20
RECOMMEND APPROVAL.:
Barbara Bell
Director of Environmental Management
APPROVED AS TO FORM
AND LEGALITY:
By
AGREED GRANTOR:
COUNTY OF HAWAI'I
HARRY KIM
Its Mayor
AGREED GRANTEE;
By
Deputy Corporation Counsel
Its
Dated:
Revised 1212005 21
SAMPLE AGREEMENT
DIVERSION GRANT PROGRAM FY 2005 -2006
ATTACHMENT A
MONTHLY AWARD FOR PROVISION OF RECYCLABLE COLLECTIONS AT PERMITTED
COUNTY SOLID WASTE MANAGEMENT FACILITY
Transfer Station Type of Collection(s)
Total Monthly Award
Hilo
$
Papaikou
$
Honomu
$
Laupahoehoe
$
Paauilo
$
Honokaa
$
Waimea
$
Hawi
$
Puako
$
Kealakehe
$
Keauhou
$
Keei
$
Waiea
$
Waiohinu
$
Pahala
$
Volcano
$
Glenwood
$
Keaau
$
Pahoa
$
Kalapana
$
Revised 1212005 22
STATE OF HAWAII )
SS.
COUNTY OF HAWAII )
On this day of , 2005, before me personally appeared HARRY
KIM, to me personally known, who, being by me duly sworn, did say that he is the Mayor of the
COUNTY OF HAWAII, a municipal corporation of the State of Hawai'i; that the seal affixed to
the foregoing instrument is the corporate seal of the said County of Hawaii; that the foregoing
instrument was signed and sealed in behalf of the County of Hawai'i by authority given to said
Mayor of the County of Hawai'i by Section 5- 1.3(g) of the County Charter, County of Hawaii
(2000), as amended; and said HARRY KIM acknowledged said instrument to be the free act
and deed of said County of Hawai'i.
Notary Public, State of Hawaii
My commission expires:
Revised 1212005 23
STATE OF HAWAII
SS.
COUNTY OF HAWAII )
On this day of 2005, before me appeared
to me personally known, who, being by me duly
sworn, did say that he/she is the of
a Hawaii Corporation;
that the seal affixed to the foregoing instrument is the corporate seal of said corporation; that
said instrument was signed and sealed in behalf of said corporation by authority of its Board of
Directors; and the said acknowledged said instrument to
be the free act and deed of said corporation.
Notary Public, State of Hawaii
My commission expires:
Revised 1212005 24
Harry Kim
Mayor
July 10, 2006
County of Hawaii
Finance Department
25 Aupuni Street, Room 118 • Hilo, Hawaii 96720
(808) 961 -8234 • fax (808) 961 -8248
Ms. Barbara Bell, Director
Department of Environmental Management
County of Hawaii
25 Aupuni Street
Hilo, HI 96720
Dear Barbara,
William Takaba
Director
Nancy E. Crawford
Deputy Director
C7
CTN
L
E—
My staff and I have had a chance to review the draft Limit Scope Performance Audit of
the Department of Environmental Management Recycle and Diversion Grant Program
for Fiscal Years 2004 and 2005.
We have the following comments to make on the audit:
r-"
rrI
E,�0
C/3 i i
o
• On pages 11 and 16, the recommendation is made to use the FRESH project
accounting module to help track the contract - and program- related expenditures, as
well as, the billings and payments made to the contractors, While this may be a
viable option, I believe that your staff are already aware that they can use the General
Ledger and Purchasing (PO section) modules to track much of the same information.
The Update Purchase Orders screen provides a complete history of each contract that
was implemented after we went live on FRESH in May of 2004 (or since conversion
for purchase orders converted from the WANG). This information includes payments
made to each contractor (vendor).
• On page 15, the recommendation is made to consult with the Finance Department to
help establish a risk management policy. We are happy to work with your
department to look at risks and exposures.
• On page 17, the recommendation is made to consult with the Finance Department and
Corporation Counsel to develop written policies and procedures relating to
procurement and contracting. As I am sure you are aware, the Finance Department
has a Purchasing Manual, which contains all of the County's purchasing and
procurement policies and procedures that apply to every department in the County.
However, if you decide to develop more specific policies and procedures for your _
. 0H E O T M
Hawai'i County is an equal opportunity provider and employer. JUL 1 V 2006
hk r0 -7
Page 2
department, we will be happy to help ensure that they are not in conflict with the
County's policies. In addition, the Departments of Finance and Environmental
Management, as well as others, continue to work with Corporation Counsel to update
the standard terms and conditions for all contracts.
In various sections of the report, the procurement exemption is mentioned. It is our
understanding that for the last decade, the Finance Department has considered the
diversion grant and glass diversion grant programs to be outside of the procurement
regulations. A competitive procurement process does not lend itself to this type of
project, which encourages broad participation by awarding contracts to all qualified
vendors. It was developed and budgeted as a grant program.
On page 24 in the second recommendation, you may want to consult with
Corporation Counsel about taking any "conflicts of interest" or "related party
transaction" issues to the Ethics Commission to make a ruling.
On page 71, the Department of Finance will be changing our policy of certifying
funds to make the date match the day we encumber the funds when the contract is
routed to help prevent this type of confusion in the future. The date that the contract
is entered and the PO created, is the date the funds are actually certified.
if you have any questions on the above, or if we can be of additional service, please do
not hesitate to call me.
Sincerely,
i
William Takaba
Director
cc: Dixie Kaetsu, Managing Director