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Recycling Board Five Year Financial & Compliance Audit (2011/12 - 2015/16)

Executive Summary

Crowe Horwath LLP (Crowe) conducted this Five Year Financial and Compliance Audit of funds raised through the Alameda County Waste Reduction and Recycling Initiative Charter Amendment (“Measure D”). This Five Year Audit was conducted in two (2) phases. The Phase I audit covered the three (3) fiscal years of 2011/12, 2012/13, 2013/14. The Phase II audit covered the two (2) fiscal years of 2014/15 and 2015/16.

For Phases I and II, we found no significant Measure D compliance issues after examining the finances of the Recycling Board, member agencies, and grant recipients. Our work included on-site reviews of the Recycling Board, each of the sixteen (16) member agencies, and a total of twenty-seven (27) grant recipients. We conducted our Phase I field work between November, 2014, and May, 2015; and the Phase II field work between January, 2017, and June, 2017.

In Section 1 of this report, we provide an introduction and background of the audit. In Section 2 of this report, we identify the flow of Measure D monies, from collection by the Recycling Board from landfill operators, to distribution of Measure D monies for programs managed by the Recycling Board, and to the member agencies.

In Section 3 of this report, we provide our financial and compliance assessment results. For each financial and compliance provision of Measure D, we identify whether the applicable entity met the requirement and, if so, how the entity met the requirement (in Exhibit 3-1 and 3-2). We found Alameda County and the Recycling Board in compliance with nine (9) Measure D compliance areas.

We found the member agencies in compliance with seven (7) Measure D compliance areas, with some minor exceptions. We found some minor variations between expenditure amounts reported by member agencies on their Annual Measure D Programs report and expenditure amounts we identified through our audit. These differences were not considered material. Exhibit ES-1 summarizes our financial and compliance findings. We provided some recommendations for the Recycling Board to consider regarding member agency guidance and reporting tools related to expense reporting.

In Section 4 of this report, we provide our review of Recycling Board waste diversion results for the audit period. We observed that the Recycling Board is using a range of methods to track changes in waste diversion levels, and the Recycling Board’s use of the percentage of divertable materials within the refuse container continues to represent a progressive and focused approach for measuring and targeting reductions in curbside disposal volumes.

We found that during the Phase I period it was likely that reductions in per capita disposal rates were related to economic factors (not program enhancements or increasing curbside recycling or organics participation levels). In Phase II, we found that Measure D per capital disposal rates leveled. We found the Recycling Board in compliance with AB 939 goals, and at 73 percent diversion Countywide in 2015 (on a weighted average basis across the sixteen member agencies), about two (2) percent short of the aggressive 75 percent diversion goal set for 2010. We provided some recommendations for the Recycling Board to consider with disposal and diversion related reporting to member agencies.

In Section 5 of this report, we provide our recommendations from the audit. Exhibit ES-2 provides a summary of our recommendations. We provide these recommendations in the spirit of simplifying the Measure D reporting and auditing process and clarifying Measure D expense applicability. To note, the Board implemented, or is in the process of implementing, a number of these recommendations, originally provided in 2015 Phase I results.

There are seven (7) appendices to this report. These appendices provide such information as the Measure D text; related Recycling Board resolutions and memoranda; member agency background; supporting details for our compliance testing; and a summary of grant recipients reviewed.