Hawaii Bottle Bill Fails Audit

After two years of preparation by Hawaii’s Department of Health (HDOH), the State’s Deposit Beverage Container Program or so-called “bottle bill” has become an accounting nightmare according to the state auditor’s report. There have been $39 million in collections as of June 2005 and HDOH still lacks an auditable financial accounting system.

“Immediate steps must be taken to improve the program’s operational and financial management and public education to ensure its future,” as stated in the 72-page state auditor’s report.

Consumers started redeeming their approved containers on January 1st, 2005. The goal of the Program was to reclaim 80 percent of some 800 million beverage containers consumed in Hawaii annually according to the state auditor’s report. Each bottle or can is redeemed for 5 cents per the Program provisions.

The Program was established to highlight the need for recycling, reduce litter, and minimize economic costs to Hawaii’s residents, businesses, and government. Hawaii became one of 11 states to have some form of a beverage container recycling program with the passage of this legislation according to the state auditor’s report. The Program is managed by HDOH’s Office of Solid Waste Management (OSWM). OSWM also oversees the Program’s Special Fund.

Since September 1, 1994, glass container importers have been paying 1.5 cents per container in glass advance disposal fees into an account in the Special Fund, according to the state auditor’s report. Starting October 1, 2002, these distributors paid .5 cent (one-half cent) into the Special Fund for each plastic or metal beverage container manufactured or imported into the state. On October 1, 2004, the fee increased to 1 cent on all containers including glass, plastic, and metal. The initial 1994 glass advance disposal fees only apply to those containers not included in the “bottle bill.”

In addition to the previous fee schedule, when the “bottle bill” program began on January 1st, 2005, distributors were supposed to begin paying a refundable 5-cent deposit fee into the Special Fund. The state legislature allowed distributors to pay the refundable fee as early as November 1st, 2004 for containers with the five-cent refund value mark.

“We observed and experienced many examples of inaccurate transactions. This is a major weakness of the system that is susceptible to exploitation and abuse,” the audit report said.

Problems were found at 33 of the 57 approved redemption centers in the Program according to the Honolulu Advertiser. Auditors redeemed containers at these centers between May and October. It was found that redemption center employees did not always count or weigh the containers that consumers brought. A center employee is allowed to weigh any redemptions of 50 or more containers. Containers without the HI-5 label were also accepted. One of the main concerns is that HDOH could be paying for unlabeled or nonexistent containers according to KHNL.

Consumers were also found to inflate their counts either purposefully or inadvertently according to the Honolulu Advertiser. Some companies that lost money based on the weight of their containers redeemed resorted to weighing all redemptions after their losses were noted. This lead to longer lines and consumer complaints of being underpaid for smaller containers that weight less. To remedy complaints, companies like Reynolds Recycling have returned to counting all redemptions under 50 in number.

The Honolulu Advertiser reports that state deputy director of environmental health Harry Lau said, “The program has come a long way in a short time. We have been making improvements, and we will continue to make improvements.”

You may like these other stories...

The Public Company Accounting Oversight Board (PCAOB) on Tuesday adopted a new auditing standard and amendments in three areas of the audit that could pose an increased risk of material misstatement in company financial...
Read more from Larry Perry here and in the Today’s World of Audits archive.In my last article, I presented an overview of one of the first steps in the preplanning phase of an audit engagement: reviewing prior year...
Read more from Larry Perry here and in the Today’s World of Audits archive.AU-C Section 800, Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks (SPFs),...

Already a member? log in here.

Upcoming CPE Webinars

Oct 30Many Excel users have a love-hate relationship with workbook links.
Nov 5Join CPA thought leader and peer reviewer Rob Cameron and learn ways to improve the outcome of your peer reviews while maximizing the value of your engagement workflow.
Nov 12This webcast presents basic principles of revenue recognition, including new ASU 2014-09 for the contract method. Also, CPAs in industries who want a refresher on revenue accounting standards will benefit.
Nov 18In this session Excel expert David Ringstrom, CPA tackles what to do when bad things happen to good spreadsheets.