Bill Text: HI HR156 | 2012 | Regular Session | Amended
Bill Title: Audit; Deposit Beverage Container Program
Spectrum: Partisan Bill (Democrat 13-0)
Status: (Passed) 2012-04-12 - (H) Resolution adopted in final form. [HR156 Detail]
Download: Hawaii-2012-HR156-Amended.html
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HOUSE OF REPRESENTATIVES |
H.R. NO. |
156 |
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TWENTY-SIXTH LEGISLATURE, 2012 |
H.D. 1 |
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STATE OF HAWAII |
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HOUSE RESOLUTION
URGING THE DEPARTMENT OF HEALTH TO NOT IMPOSE ANY INCREASE TO THE NON-REFUNDABLE DEPOSIT BEVERAGE CONTAINER FEE UNTIL THE AUDITOR HAS COMPLETED AN UPDATED MANAGEMENT AND FINANCIAL AUDIT OF THE DEPOSIT BEVERAGE CONTAINER PROGRAM.
WHEREAS, Act 176, Session Laws of Hawaii 2002, established the deposit beverage container recycling program ("program"), which was intended to increase recycling rates and reduce litter; and
WHEREAS, the program, as currently administered by the Department of Health ("Department"), collects a fee of six cents on each deposit beverage container sold in the State; and
WHEREAS, the six cent fee is passed on to consumers, resulting in increased beverage prices; and
WHEREAS, the six cent fee is comprised of a refundable five cent deposit that consumers may redeem by recycling the containers at redemption centers, and a one cent non-refundable deposit beverage container fee to subsidize redemption center operations; and
WHEREAS, all revenues generated by the five cent deposit and the one cent container fee are placed into a deposit beverage container special fund; and
WHEREAS, moneys in the special fund are used to reimburse the five cent refund values to consumers and to pay handling fees to the redemption centers; and
WHEREAS, the special fund was also intended, in part, to fund the administrative, audit, and compliance activities associated with the collection and payments of the deposits and handling fees of the program, conduct recycling education, promote recyclable market activities, support the handling and transportation of the deposit beverage containers to end-markets, hire personnel to implement the program, and fund associated office expenses; and
WHEREAS, Hawaii is one of only two states where redemption funds are managed by the State, and therefore the Legislature mandated that the Auditor periodically audit the program; and
WHEREAS, section 342G-107, Hawaii Revised Statutes, requires the Auditor to conduct a management and financial audit of the program for fiscal years 2004-2005 and 2005-2006, and for each fiscal year thereafter in an even-numbered year and to submit the audit report, including the amount of unredeemed refund value and recommendations, to the Legislature and the Department no later than twenty days prior to the convening of the next regular session; and
WHEREAS, the November 2005 audit of the program concluded that the Department had failed to establish a financial accounting system to ensure that transactions are properly recorded and reported and that assets are safeguarded; and
WHEREAS, the November 2005 audit further concluded that the program lacked numerous internal controls over cash receipts and disbursements and financial reporting which created opportunities for potential abuse and untimely financial reporting; and
WHEREAS, the Auditor has not submitted audit reports since November 2005, and consequently, the Legislature has not received audits for 2006, 2008, and 2010; and
WHEREAS, despite the Department's efforts to improve the program and the management of the special fund, there has been no subsequent management and financial audit to otherwise refute the findings and recommendations in the November 2005 audit; and
WHEREAS, the Department's December 2010 annual report to the Legislature on solid waste management detailed that the program's solvency is contingent on a low recycling and redemption rate, because the one cent container fee is insufficient to cover the handling fees paid to redemption centers. The report further stated:
"As of June 30, 2010, the [Deposit Beverage Container] special fund had about $14 million remaining after encumbrances. The Program must rely on the fund's reserves to sustain itself to keep up with the high rates of deposit refunds. This is because the Program pays out more than it collects per container. While the Program collects 6 cents per container (deposit plus container fee), it pays 7 to 9 cents per container (5 redemption plus 2-4 cents handling fee). The Program relies on the percentage of unredeemed deposits to sustain itself. As the percentage of unredeemed deposits shrinks, due to the high number of deposits being refunded, then the Program must utilize the fund's reserves or increase the container fee to sustain itself"; and
WHEREAS, the Department's December 2009 report to the Legislature on the activities of the program stated that, aside from moneys expended to refund the five cent deposit, for the period of October 2002 through June 2009, the Department paid $63,000,000 in handling fees to redemption centers and $17,000,000 in administrative expenses, reverse vending machine rebates, infrastructure improvement grants, and county support; and
WHEREAS, the 2010 solid-waste report stated that, aside from moneys expended to refund the five cent deposit, in fiscal year 2010 alone the Department paid $18,500,000 in handling fees to redemption centers and $2,500,000 in administrative expenses; and
WHEREAS, the 2009 report and the 2010 solid-waste report collectively indicate that, from October 2002 through the fiscal year 2010, the Department paid more than $81,000,000 in handling fees to redemption centers and more than $19,000,000 in administrative expenses; and
WHEREAS, under the program, the Department has collected approximately $400,000,000 in fees and deposits from Hawaii consumers, yet has operated with little external oversight of the program and special fund; and
WHEREAS, the non-refundable one cent container fee raises beverage prices in Hawaii by at least $10,000,000 each year; and
WHEREAS, the Department has indicated its intent to increase the non-refundable one cent container fee as early as September 1, 2012, and has claimed that additional funds are required for the program; and
WHEREAS, section 342G-102, Hawaii Revised Statutes, authorizes the Department to increase the non-refundable container fee from one cent to 1.5 cents per container if the redemption rate is greater than seventy per cent; and
WHEREAS, the Department maintains that currently, the redemption rate is greater than seventy per cent; and
WHEREAS, any increase in the non-refundable container fee would further escalate beverage prices in Hawaii by an additional $5,000,000 to $10,000,000 each year; and
WHEREAS, this increase in beverage prices would be passed on to consumers; and
WHEREAS, in light of the Auditor's November 2005 findings of an inadequate financial accounting system and the lack of internal controls, and given the significant sums expended from the special fund, the Department's expenditure reports are insufficient to assess whether the special fund has been appropriately managed for its intended purpose; and
WHEREAS, until the Auditor completes a current audit to attest to the management and financial integrity of the program and the special fund, any increase in the non-refundable container fee is an unjustifiable economic burden on consumers; now, therefore,
BE IT RESOLVED by the House of Representatives of the Twenty-sixth Legislature of the State of Hawaii, Regular Session of 2012, that the Department is urged to not increase the non-refundable deposit beverage container fee until the Auditor has completed an updated management and financial audit of the deposit beverage container recycling program in accordance with section 342G-107, Hawaii Revised Statutes; and
BE IT FURTHER RESOLVED that the Auditor is requested to complete a management and financial audit of the program, pursuant to section 342G-107, Hawaii Revised Statutes, and address among other things:
(1) The concerns reported in the November 2005 audit as to the Department's lack of accounting and internal controls for the program and special fund;
(2) The Department's current management of the program and the special fund;
(3) Whether past expenditures from the special fund were consistent with the purpose of the program;
(4) The results and continued financial viability of the program; and
(5) Whether any increase to the non-refundable deposit beverage container fee may be justified for consumers; and
BE IT FURTHER RESOLVED that the Auditor is requested to submit the audit to the Legislature at least twenty days prior to the convening of the Regular Session of 2013; and
BE IT FURTHER RESOLVED that the Auditor is requested to submit biennial audits of the program, in accordance with section 342G-107, Hawaii Revised Statutes, thereafter; and
BE IT FURTHER RESOLVED that certified copies of this Resolution be transmitted to the Auditor and the Director of Health.
Audit; Deposit Beverage Container Program
