Report 2010-101 All Recommendation Responses

Report 2010-101: Department of Resources Recycling and Recovery: Deficiencies in Forecasting and Ineffective Management Have Hindered the Beverage Container Recycling Program (Release Date: June 2010)

Recommendation #1 To: Resources Recycling and Recovery, Department of

The department should continue with its efforts to implement regulation changes that will require beverage distributors to register with the department and to notify the department if another entity has agreed to report and make payments on behalf of that beverage distributor.

Annual Follow-Up Agency Response From September 2012

The Department proposed changes to the California Code of Regulations (Title 14, Division 2, Chapter 5) which were approved by the Office of Administrative Law effective on September 1, 2012. Section 2230 has been amended and Sections 2231, 2300 and 2301 have been added to require beverage manufacturers and distributors to register with the Department and for distributors to report pay on behalf agreements with other entities.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Recommendation #2 To: Resources Recycling and Recovery, Department of

To improve management of its fraud investigations, the department should take the following actions: Formalize the approach used to analyze recycling data for potential fraud and develop criteria for staff to use when deciding whether to refer anomalies for investigation. Because DORIIS will be a central data source for recycling activities once it is implemented, the department should continue with its plan to automate the review of recycling data within DORIIS to identify potential fraud.

Annual Follow-Up Agency Response From October 2013

CalRecycle, Division of Recycling, Recycling Program Enforcement Branch (RPEB) currently produces, on a daily basis, a rules based Fraud Detection Report (FDR) for anomaly detection of disbursement transaction data. This report is automatically generated by the Division of Recycling Integrated Information System (DORiis). This report detects known indicators/ patterns of fraud using the primary reporting form recyclers used to report purchases and movement of CRV beverage containers. RPEB management uses the report to effectively assign investigative and inspection resources to potential high-value fraud targets identified on the FDR. The FDR identifies anomalous and/or suspect transactions before they are invoiced for CRV payment reimbursement. This provides RPEB the opportunity to place suspect transactions on hold, as needed, until the supporting documentation can be reviewed for accuracy and completeness by RPEB field investigators. The FDR generated from DORiis provides CalRecycle with the ability to mitigate CBCRF losses associated with fraudulent transactions on a pre-payment basis. CalRecycle has applied the above tools and processes and has documented this in a policy and procedures manual that was completed in December, 2012.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From September 2012

CalRecycle, Division of Recycling, Recycling Program Enforcement Branch (RPEB) currently produces, on a daily basis, a rules based Fraud Detection Report (FDR) for anomaly detection of disbursement transaction data. This report is automatically generated by the Division of Recycling Integrated Information System (DORiis). This report detects known indicators/ patterns of fraud using the primary reporting form recyclers used to report purchases and movement of CRV beverage containers. RPEB management uses the report to effectively assign investigative and inspection resources to potential high-value fraud targets identified on the FDR. The FDR identifies anomalous and/or suspect transactions before they are invoiced for CRV payment reimbursement. This provides RPEB the opportunity to place suspect transactions on hold, as needed, until the supporting documentation can be reviewed for accuracy and completeness by RPEB field investigators. The FDR generated from DORiis provides CalRecycle with the ability to mitigate CBCRF losses associated with fraudulent transactions on a pre-payment basis. CalRecycle has applied the above tools and processes and will document this in a policy and procedures manual that is expected to be complete in December, 2012.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Recommendation #3 To: Resources Recycling and Recovery, Department of

To improve oversight of grants and ensure that the intended value is received from the grant funds it awards, the department should do the following: For recipients of market development grants that are unable to meet the goals of their grants, maintain contact with grantees after the project is completed to determine if the goals may ultimately be achieved.

Annual Follow-Up Agency Response From October 2013

The Department surveyed recipients of the five closed Market Development Expansion (MDE)Grants that the Department determined were unable to meet their project goals. These surveys were conducted in January/ February 2012 along with follow-up contact to fully determine whether these five recipients untilmately achieved the goals. The Department will continue to survey MDE grant recipients that do not complete their grant objectives with the same survey.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Only 2 of the 5 grantees responded to the survey--of the other 3 grantees, 2 declined to participate and 1 appears to have gone out of business. Despite this low rate of response, we consider this recommendation fully implemented as the department has no further steps to take to implement our recommendation.

Annual Follow-Up Agency Response From September 2012

ABX8 7 allows the Market Development Expansion grant program to sunset on January 1, 2012. The current grants are governed by the Grant Management Procedures Manual, Section X, Project Management and Administration, Section G. Final Report and Section H. Close Out, that require CalRecycle grant managers and supervisors maintain contact with all grantees until the files are closed, both those that are on track and those that are unable to fulfill the goals of their grant. The grant files cannot be closed without explanation and final payment adjustment for any goals not met, which will not be possible until the grant agreements expire at the end of FY 2013/2014. After the grant files are closed as approved by Branch Management, CalRecycle will continue to contact grantees to assess whether the goals of the projects were ultimately achieved.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Recommendation #4 To: Resources Recycling and Recovery, Department of

The department should weave benchmarks, coupled with metrics to measure the quality of its activities, into the strategic plan for the beverage program to allow it to better measure progress in meeting goals.

Annual Follow-Up Agency Response From October 2016

CalRecycle remains committed to carrying out the Act and implementing Program Reform Phase 1 but expects significant program changes due in part to ongoing reform discussions. The estimated completion date is December 2017.

Due to fraud prevention measures begun in November 2013, the department observed decreases in recycling volumes, reduced refund value expenditure, and a lowering of the structural deficit.

BCPs approved for FY 15/16 provided additional resources for processor oversight, the imported material reporting program, and handling fee audits. The department is currently analyzing the impact of these measures.

CalRecycle has contracted with the University of California, Berkeley, to analyze current program costs and subsidies of consumer redemption and to make recommendations on the effectiveness of convenient recycling opportunities.

CalRecycle staff continues to refine its forecasting, including: making projections using monthly data instead of quarterly data, incorporating additional years of historical data, and using a regression framework to build and compare projections based on multiple factors.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From September 2015

Based upon the results of program stakeholder workshops in the fall of 2012, CalRecycle received approval in the FY 13/14 state budget for our proposal to implement Program Reform Phase I. Program Reform Phase I implementation, which began in November 2013 included elimination of commingled loads (i.e., mix of CRV and non-CRV containers presented by consumers in the same load) at certified recycling centers, implementation of a pre-certification training/exam process, mandatory use of the Division of Recycling Integrated Information System (DORIIS), reductions in the allowable daily load limits and implementation of reporting and inspection requirements for individuals importing empty beverage container into CA.

As a result of Program Reform Phase I implementation and an improving economy, the structural deficit was reduced to $55.8M in FY 13/14 and is projected to be $37.2M for FY 14/15 and $29.9M for FY 15/16. The Division of Recycling began providing Quarterly Program Updates as part of CalRecycle's Monthly Public Meetings. These quarterly updates provide the general public with comprehensive performance metrics for all operational activities conducted by the Division of Recycling. CalRecycle is also making significant qualitative changes to the legislatively mandated Quarterly Report on the Status of the Beverage Container Recycling Fund in an effort to provide more complete, clear and concise information about fund status and projections for future fund balances.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From October 2014

Pursuant to Chapter 452 (AB341, Statutes of 2011), CalRecycle is required to provide a report to the Legislature by January 1, 2014, that provides strategies to achieve a 75% waste diversion policy goal that also includes other specified information. This report is forthcoming. In addition, a structural funding deficit of almost $100M in the Beverage Container Recycling Fund requires that CalRecycle work with stakeholders on a sustainable remedy that involves what could be significant program reforms. The implication of both of these efforts to a comprehensive, detailed and relevant strategic plan is significant. CalRecycle anticipates that the stakeholder processes will result in more specific proposals in the 2014 and 2015 fiscal years and will inform a formal strategic planning process that will take final form in 2015.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From November 2013

The CalRecycle management team engaged stakeholders in examining Chapter 476 (AB341, Statutes of 2011) goals as well as how to begin addressing the structural deficit in the Beverage Container Recycling Program's (BCRP) Special Fund. As a result of these meetings CalRecycle submitted a Finance Letter in spring 2013 which was approved by the Legislature as part of the 2013 Budget Act. The program will incorporate these efforts into a comprehensive and detailed strategic plan that will take final form in 2014.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From September 2012

The BSA recommendation is that Department of Resources Recycling and Recovery (CalRecycle) integrate benchmarks and metrics designed to measure the quality of the program's activities into the strategic plan to better measure the progress in meeting the program's goals.

CalRecycle is currently engaged in two stakeholder processes that will significantly influence its future operations. Pursuant to Chapter 452 (AB341, Statutes of 2011), CalRecycle is required to provide a report to the Legislature by January 1, 2014, that provides strategies to achieve a 75% waste diversion policy goal that also includes other specified information. In addition, a structural funding deficit of almost $100M in the Beverage Container Recycling Fund requires that CalRecycle work with stakeholders on a sustainable remedy that involves what could be significant program reforms. The implication of both of these efforts to a comprehensive, detailed and relevant strategic plan is significant. CalRecycle anticipates that the stakeholder processes will result in more specific proposals in the 2013 and 2014 fiscal years that will inform a formal strategic planning process that will take final form in 2014.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Recommendation #5 To: Resources Recycling and Recovery, Department of

The department should ensure that the strategic plan incorporates all relevant activities of the beverage program.

Annual Follow-Up Agency Response From October 2016

CalRecycle remains committed to carrying out the Act and implementing the activities of Program Reform Phase 1 but there is no strategic plan currently. It is on hold while the department discusses additional reforms with key stakeholders with the goal of implementing the resulting changes in December 2017.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From September 2015

Based upon the results of program stakeholder workshops in the fall of 2012, CalRecycle received approval in the FY 13/14 state budget for our proposal to implement Program Reform Phase I. Program Reform Phase I implementation, which began in November 2013 included elimination of commingled loads (i.e., mix of CRV and non-CRV containers presented by consumers in the same load) at certified recycling centers, implementation of a pre-certification training/exam process, mandatory use of the Division of Recycling Integrated Information System (DORIIS), reductions in the allowable daily load limits and implementation of reporting and inspection requirements for individuals importing empty beverage container into CA.

As a result of Program Reform Phase I implementation and an improving economy, the structural deficit was reduced to $55.8M in FY 13/14 and is projected to be $37.2M for FY 14/15 and $29.9M for FY 15/16. The Division of Recycling began providing Quarterly Program Updates as part of CalRecycle's Monthly Public Meetings. These quarterly updates provide the general public with comprehensive performance metrics for all operational activities conducted by the Division of Recycling. CalRecycle is also making significant qualitative changes to the legislatively mandated Quarterly Report on the Status of the Beverage Container Recycling Fund in an effort to provide more complete, clear and concise information about fund status and projections for future fund balances.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From October 2014

Pursuant to Chapter 452 (AB341, Statutes of 2011), CalRecycle is required to provide a report to the Legislature by January 1, 2014, that provides strategies to achieve a 75% waste diversion policy goal that also includes other specified information. This report is forthcoming. In addition, a structural funding deficit of almost $100M in the Beverage Container Recycling Fund requires that CalRecycle work with stakeholders on a sustainable remedy that involves what could be significant program reforms. The implication of both of these efforts to a comprehensive, detailed and relevant strategic plan is significant. CalRecycle anticipates that the stakeholder processes will result in more specific proposals in the 2014 and 2015 fiscal years and will inform a formal strategic planning process that will take final form in 2015.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From November 2013

The CalRecycle management team engaged stakeholders in examining Chapter 476 (AB341, Statutes of 2011) goals as well as how to begin addressing the structural deficit in the Beverage Container Recycling Program's (BCRP) Special Fund. As a result of these meetings CalRecycle submitted a Finance Letter in spring 2013 which was approved by the Legislature as part of the 2013 Budget Act. The program will incorporate these efforts into a comprehensive and detailed strategic plan that will take final form in 2014.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From September 2012

The BSA recommendation is that Department of Resources Recycling and Recovery (CalRecycle) incorporate all relevant activities of the beverage program into the department's strategic plan.

CalRecycle is currently engaged in two stakeholder processes that will significantly influence its future operations. Pursuant to Chapter 452 (AB341, Statutes of 2011), CalRecycle is required to provide a report to the Legislature by January 1, 2014, that provides strategies to achieve a 75% waste diversion policy goal that also includes other specified information. In addition, a structural funding deficit of almost $100M in the Beverage Container Recycling Fund requires that CalRecycle work with stakeholders on a sustainable remedy that involves what could be significant program reforms. The implication of both of these efforts to a comprehensive, detailed and relevant strategic plan is significant. CalRecycle anticipates that the stakeholder processes will result in more specific proposals in the 2013 and 2014 fiscal years that will inform a formal strategic planning process that will take final form in 2014.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Recommendation #6 To: Resources Recycling and Recovery, Department of

To improve its forecasting of revenues and expenditures for the beverage fund, the department should implement a new forecasting model in time for it to be used for the fiscal year 2011–12 Governor’s Budget.

1-Year Agency Response

The department redesigned its forecasting methodology, which it used for the October 2010 fund projection. (2012-406, p. 157).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #7 To: Resources Recycling and Recovery, Department of

To improve its forecasting of revenues and expenditures for the beverage fund, the department should place appropriate controls over the forecast model, including having management review the reliability of forecasting results before they are used and monitoring the reliability of forecast results against actual figures on a monthly and yearly basis.

1-Year Agency Response

The department implemented review procedures, including a process to compare actual sales and return values with prior projections. (2012-406, p. 157).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #8 To: Resources Recycling and Recovery, Department of

To improve its forecasting of revenues and expenditures for the beverage fund, the department should ensure that the contingency reserve for the beverage fund does not exceed the statutory limit specified in the Public Resources Code.

1-Year Agency Response

The department followed the Public Resources Code when calculating the contingency reserve and has implemented review procedures to evaluate the appropriateness of the contingency reserve. (2012-406, p. 158).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #9 To: Resources Recycling and Recovery, Department of

To improve its forecasting of revenues and expenditures for the beverage fund, the department should continue with its efforts to hire an economist to lead its forecasting efforts.

1-Year Agency Response

Following the August 2010 hiring freeze, the department indicated that it suspended its process for hiring an economist to lead its forecasting efforts. Nevertheless, to mitigate this impact, it assigned a department employee to assist in reviewing and revising the forecasting model. (2012-406, p. 158).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #10 To: Resources Recycling and Recovery, Department of

To improve its forecasting of revenues and expenditures for the beverage fund, the department should ensure that the actual fund balances of the beverage fund in future governor's budgets reflect actual revenues and expenditures from its accounting records.

1-Year Agency Response

The department developed a procedure to reconcile its records with the State Controller’s Office data to ensure correct information is presented to the Department of Finance for preparing the governor’s budget. (2012-406, p. 158).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #11 To: Resources Recycling and Recovery, Department of

The department should better follow its three-year plan to audit beverage distributors. Steps to accomplish this goal could include performing an analysis of risks that could result in underpayment of redemption payments or implementing policies to terminate audits after the department’s initial assessment of a beverage distributor concludes that it is unlikely that an underpayment exists.

1-Year Agency Response

The department has included a risk-based evaluation in its audit program to determine whether there is material harm to the fund and to terminate audits based on initial assessments. The department updated its current three-year audit plan to reflect this change, and its auditors received training on this risk-based process. (2012-406, p. 158).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #12 To: Resources Recycling and Recovery, Department of

To avoid exceeding the statute of limitations for collecting underpayments, and to bill for collection sooner, the department should strive to complete the fieldwork for audits in a more timely fashion. Further, the department should implement policies to shorten the time needed to review completed audits before billings are made, and should also develop policies to expedite reviews when an audit identifies a significant underpayment.

1-Year Agency Response

The department indicated that its Division of Recycling Integrated Information System (DORIIS) tracks audit activity including the statute of limitations for each audit. The department provided statute of limitations training for audit staff in its investigations and audits units in December 2010. (2012-406, p. 159).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #13 To: Resources Recycling and Recovery, Department of

To improve management of its fraud investigations, the department should track all fraud leads that the investigations unit receives and track the disposition of those leads, as well as document the reasons for closing leads without an investigation.

1-Year Agency Response

The department adopted procedures for analyzing fraud tips and entering them into DORIIS for tracking and follow-up. (2012-406, p. 159).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #14 To: Resources Recycling and Recovery, Department of

To improve management of its fraud investigations, the department should continue to evaluate the effectiveness of the fraud prevention project and whether it is a cost-beneficial activity.

1-Year Agency Response

As a result of staffing constraints and implementation of DORIIS-based analytical tools to identify potential fraud, the department decided to gradually phase out the fraud prevention project as originally envisioned beginning in 2011. The department further indicated that it will continue to evaluate new procedures to improve management of its fraud investigations. (2012-406, p. 159).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #15 To: Resources Recycling and Recovery, Department of

To improve oversight of grants and ensure that the intended value is received from the grant funds it awards, the department should perform site visits to ensure that grantees are progressing on projects as expected.

1-Year Agency Response

The department revised its grant management procedures manual regarding grantee site visit requirements and created site visit forms to document these visits. (2012-406, p. 160).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #16 To: Resources Recycling and Recovery, Department of

To improve oversight of grants and ensure that the intended value is received from the grant funds it awards, the department should require that grantees provide regular status reports that sufficiently describe their progress toward meeting the goals of the grant.

1-Year Agency Response

The department’s grant management procedures manual requires all grantees to submit periodic status reports, which includes withholding grantee payments when status reports are not current. The department also indicated that it will emphasize to staff that grantees are to submit status reports in a timely manner. (2012-406, p. 160).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #17 To: Resources Recycling and Recovery, Department of

To improve oversight of grants and ensure that the intended value is received from the grant funds it awards, the department should more closely scrutinize the risks associated with proposed market development grants.

1-Year Agency Response

According to state law, the annual funding for market development and expansion grants will end on January 1, 2012, and the department indicated that no new funding is anticipated. Thus, the department indicated that any further review of new grants is suspended until new funding is reinstated. (2012-406, p. 160).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #18 To: Resources Recycling and Recovery, Department of

To improve oversight of grants and ensure that the intended value is received from the grant funds it awards, the department should make determinations to approve grant extension requests in a timely manner.

1-Year Agency Response

The department implemented a review schedule to determine, at least three months prior to the end of a grant agreement, whether an extension is required. (2012-406, p. 161).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #19 To: Resources Recycling and Recovery, Department of

To improve oversight of grants and ensure that the intended value is received from the grant funds it awards, the department should implement policies to ensure that cities and counties spend grant funds for recycling purposes by requiring periodic reporting of expenses or reporting of how funds were used after the grant ends.

Annual Follow-Up Agency Response From October 2016

1. Implemented an approximate two-year term to expend Program funds effective FY 2015-16. Recipients will have approximately two years from the date of award to expend their funding, and repay CalRecycle any unspent or unreported funds at the end of the term. Failure to meet these requirements may result in the denial of future funding.

2. Require authorized signatures with submittal of Funding Request and Expenditure Reporting Certifications. The Signature Authority or their designee must sign a Funding Request Certification at time of submittal of the Funding Request. Effective FY 2015-16, they must also sign an Expenditure Reporting Certification for reported expenditures after funds have been spent.

3. Capability to upload expenditure reports and supporting documentation now exist in CAPRS. Recipients will be able to upload expenditure reports and supporting documentation in CAPRS. Program staff will review and determine whether the expenditures were related to the cleanup activities. Program staff developed procedures to review and collate the data in the expenditure reports submitted from prior FYs 2010-11 through 2013-14.

4. Implemented a proportionate cost policy for all eligible activities. Components of a project or activity unrelated to the cleanup activities will not be funded by the Program. The funding level will be approved on a case-by-case basis.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From September 2015

Require all payment recipients submit expenditure reports in CAPRS by date certain. If they do not account for all funds for a specific year, CalRecycle will invoice the payment recipient to return funds.

All participants were notified in FY2014-15 cycle of the requirement to submit expenditure reports in CAPRS by date certain. The necessary conversions in CAPRS were completed to allow participants to upload expenditure reports.

Require all payment recipients to upload back up documentation to CAPRS. Program staff will review backup documentation of a random sample of 60 to ensure accountability of reported expenditures. This sample size may change or a tiered review approach may be considered based on accuracy and accountability of reporting.

All participants were notified in FY2014-15 cycle of the requirement to submit back-up documentation, including proof of purchases, in CAPRS. Program staff is developing procedures for reviewing and tracking backup documentation.

Payment recipients that do not complete the expenditure report by the end of the 2nd year will be invoiced for the amount not reconciled. If they do not pay CalRecycle back by date certain, they will not be eligible to apply for the next cycle.

All participants were notified of the new requirements for FY2014-15 and subsequent cycles. Failure to complete the expenditure report and/or expend the CCPP funds appropriately will result in ineligibility for future cycles.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From December 2014

Based on the audit recommendations, staff are changing how the program is currently monitoring active cycles (FY 2011-12, 2012-13, 2013-14) for the Beverage Container City County Payment Program. Currently, program staff request 60 random sample payment recipients to submit an expenditure report into the City/County Annual Payment and Reporting System (CAPRS). CalRecycle's will now require 60 random payment recipients to upload back-up documentation to CAPRS and program staff will review this information to ensure accountability of reported expenditures. Since these cycles have no end date which payment recipients have to expend funds by (i.e., there is no term for the program under the current agreements), program staff are unable to enforce cycle closure.

CalRecycle will implement the following changes for FY 2014-15 and future cycles:

Require all payment recipients submit expenditure reports in CAPRS by date certain. If they do not account for all funds for a specific year, CalRecycle will invoice the payment recipient to return funds.

Require all payment recipients to upload back up documentation to CAPRS. Program staff will review backup documentation of a random sample of 60 to ensure accountability of reported expenditures. This sample size may change or a tiered review approach may be considered based on accuracy and accountability of reporting.

Payment recipients that do not complete the expenditure report by the end of the 2nd year will be invoiced for the amount not reconciled. If they do not pay CalRecycle back by date certain, they will not be eligible to apply for the next cycle.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From December 2014

Re: Audit 2010-101—Recommendation #19 (also included in Audit 2014 Appendix B):

Based on the audit recommendations, staff are changing how the program is currently monitoring active cycles (FY 2011-12, 2012-13, 2013-14) for the Beverage Container City County Payment Program. Currently, program staff request 60 random sample payment recipients to submit an expenditure report into the City/County Annual Payment and Reporting System (CAPRS). CalRecycle's new proposed requirement will require the same 60 random sample payment recipients to upload back-up documentation to CAPRS and program staff will review this information to ensure accountability of reported expenditures. Since these cycles have no end date (i.e., there is no term for the program under the existing open agreements), program staff are unable to enforce cycle closure.

CalRecycle is proposing the following changes for FY 2014-15 and future cycles:

Request all payment recipients to submit expenditure report in CAPRS by date certain. If they do not account for all funds for a specific year, CalRecycle will invoice the payment recipient to return funds.

Require all payment recipients to upload back up documentation to CAPRS. Program staff will review backup documentation of a random sample of 60 to ensure accountability of reported expenditures. This sample size may change or a tiered review approach may be considered based on accuracy and accountability of reporting.

If payment recipients do not complete the expenditure report at the end of the 2nd year, they will be invoiced for the amount not reconciled. If any of the 60 random sample payment recipients do not upload supporting documentation at the end of the 2nd year, they will be subject to being invoiced for the amount not reconciled. If they do not pay CalRecycle back by date certain, they will not be eligible to apply for the next cycle.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

1-Year Agency Response

The department developed a methodology to annually review a statistically valid sample of city and county payment programs recipients to ensure funds are appropriately utilized. Further, the department indicated it will complete this review by January 2013. (2012-406, p. 161).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

All Recommendations in 2010-101

Agency responses received after June 2013 are posted verbatim.