Response to the Audit
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California Department of Resources Recycling and Recovery
August 15, 2018
The Honorable Elaine M. Howle
State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Re: Audit Report 2018-107
Dear Ms. Howle:
Thank you for the opportunity to review and comment on the August 8, 2018, draft audit report entitled “California Department of Resources Recycling and Recovery: It Has Not Provided the Oversight Necessary to Ensure the Mattress Recycling Program Fulfills Its Purpose.” This draft was provided to California Environmental Protection Agency Secretary Rodriquez, who asked the Department of Resources Recycling and Recovery (CalRecycle) to respond on his behalf.
CalRecycle appreciates the opportunity to provide feedback on the information and legislative recommendations contained in the report. The California Used Mattress Recovery and Recycling Act sets forth a program that is to be administered by a Mattress Recycling Organization based upon an approved Plan, with oversight provided by CalRecycle. This type of program, known as extended producer responsibility, assigns responsibility for program design and implementation to manufacturers.
The title of the draft report indicates that CalRecycle has not exercised sufficient oversight authority. As noted in previous discussions with audit staff, CalRecycle does not concur and holds that the program has been implemented consistent with the authority provided in the existing statute. However, CalRecycle agrees that additional authority would enhance the program’s effectiveness in recovering and recycling mattresses and our oversight ability, and therefore we concur with the proposed legislative recommendations in the draft report.
CalRecycle believes the report’s utility would benefit from additional context and analysis in the findings, which provide the basis for the draft report’s recommendations.
The draft report recognizes vagueness in statute and CalRecycle’s lack of effective authority to acquire clear and concise data from industry. CalRecycle notes that additional context may have further informed the auditor’s analysis. For example:- The draft report indicates CalRecycle has not established statewide recycling goals. The draft report then acknowledges that insufficient data was available to CalRecycle to do so. CalRecycle will establish additional statewide goals once sufficient data is available.
- The draft report also indicates CalRecycle has not established goals related to convenience, encouraging source reduction, and reducing illegal mattress dumping, though it is not explicitly mandated in statute. The report recommends that the Legislature grant CalRecycle the authority to establish these types of goals. CalRecycle agrees that current statutory authority is unclear, and that these goals should be explicitly defined in statute.
- The draft report contains findings about CalRecycle’s approach to penalties, inspections and the timing of enforcement actions. CalRecycle notes that these findings omit a complete description of our inspection and enforcement process or any discussion of our level of effort and success in obtaining compliance using progressive enforcement.
CalRecycle agrees with the draft report’s recommendations to the Legislature and, consistent with your auditors’ request, has provided additional recommendations for legislative consideration. Furthermore, we are currently implementing a plan to follow-up with businesses that are failing to comply and to pursue penalties where compliance has not been achieved. CalRecycle looks forward to further conversations on how it can be helpful in ensuring mattress materials are safely and effectively managed statewide.
Please find attached CalRecycle’s more specific comments to the draft audit report.
Sincerely,
Ken DaRosa
Chief Deputy Director
cc:
Matthew Rodriquez, Secretary, California Environmental Protection
Agency
Scott Smithline, Director, CalRecycle
Brian Boone, California State Auditor
Bob Harris, California State Auditor
Attachment: Detailed Responses
Attachment: Detailed Responses
The title of the draft report, “California Department of Resources Recycling and Recovery: It Has Not Provided the Oversight Necessary to Ensure the Mattress Recycling Program Fulfills Its Purpose” implies that administrative oversight is the primary driver of programmatic success. While CalRecycle understands that this is a significant factor, ultimately the success of a program or the fulfillment of a statutory purpose is dependent on a variety of factors. These factors include adequacy of the statutory language, continual engagement with stakeholders and the regulated community, transparency of process, and ensuring the right goals and metrics are established and enforced.
Chapter 1 of the draft audit report states that CalRecycle has not provided the oversight necessary to ensure the success of the mattress program. Specifically, the report notes that the goals CalRecycle has established for mattress recycling will make evaluation of the state’s recycling efforts and mattress program’s success difficult. The chapter also provides findings and recommendations. In this attachment, CalRecycle responds to these findings and recommendations (note that the page numbers cited below correspond to pagination in the draft audit report provided to CalRecycle on August 5, not necessarily the pagination in the final report to be published by the California State Auditor).
1)
Page 14 Finding: “CalRecycle has not yet set key goals for the
Mattress Program.”
As described in CalRecycle’s November 2017 public meeting agenda item
regarding the “Proposed State Mattress Baseline and Recycling
Goals”
1
CalRecycle set initial recycling goals for the mattress program based upon:
1) Statutory authority and the data available at the time;
2) Consultation with the Mattress Recycling Council (MRC) and the
MRC’s first year annual report data as required per statute; and
3) CalRecycle’s public consultation process to solicit all
stakeholders’ input into its proposed baseline and goals.
CalRecycle also indicated that it intended to review and update the goals
by July 1, 2020. Additionally, CalRecycle stated that once sufficient data
were collected, it would consider additional metrics that would provide a
broader statewide description of used mattress management in California,
including, but not limited to, program convenience, illegal dumping, and
source reduction (all items mentioned by the report).
CalRecycle considers establishing meaningful, clear goals and metrics critical to successful measurement of used mattress management in California. As the draft audit report notes, CalRecycle was hindered by a lack of data when setting goals in November 2017.
During public consultation of its proposed mattress baseline and recycling goals process, stakeholders offered no written comments at that time relative to convenience, illegally-dumped mattresses, or source reduction, with the exception of the MRC’s comments on the topic. Instead, the majority of the comments stated that CalRecycle’s proposed baseline and goals are consistent with regulations and that a baseline for renovation should not be set until better data are available. For example, the Los Angeles County Solid Waste Management Committee/Integrated Waste Management Task Force concurred that “the mattress recycling baseline and goals are consistent with current and upcoming recycling regulations.” One renovator (the only one to offer formal comments) urged CalRecycle “…to reconsider setting a baseline for renovation using 2016 numbers, and to hold off until 2017 totals can be obtained.” The MRC’s Mattress Advisory Committee recommended (regarding the proposed renovation baseline) that “that number be removed from the listed goals, and a new number should not be set until better data becomes available.”
Further, statute does not explicitly require CalRecycle to establish goals relative to convenience, illegally dumped mattresses, or source reduction. While it may be possible to interpret the statutory term “recycling goals” to include various recycling-related goals (e.g., convenience, illegally dumped mattresses, source reduction, and renovation-related goals), this term is not defined in statute and its interpretation has been disputed by stakeholders. Statute requires CalRecycle to establish, in consultation with the mattress recycling organization, the state mattress recycling baseline amount and state mattress recycling goals using methodology contained in the plan and information contained in the MRC’s first annual report in accordance with the California Used Mattress Recovery and Recycling Act. During CalRecycle’s consultation with the MRC as part of the initial state mattress baseline and recycling goal development process, the MRC took the position that goals such as convenience, illegal dumping, and source reduction cannot be recycling goals and argued that CalRecycle may only set a numeric recycling baseline and percentage rate recycling goal.
In determining whether to move forward with these additional recycling goals during the initial baseline and goal-setting process in 2017, CalRecycle considered the lack of clear statutory authority, and the risk of a legal challenge. While acknowledging that additional recycling goals would be beneficial for the mattress program, CalRecycle decided it would be in the interest of the state, its residents, and the program to focus resources on the immediate needs of ensuring the new program’s effective implementation. CalRecycle decided to propose these and/or other recycling goals in the subsequent two years, as allowed per statute. Accordingly, CalRecycle focused on conducting significant education, outreach, and compliance efforts to make sure that mattress recyclers, renovators, and solid waste facilities required to report to CalRecycle accurately; ensuring the mattress recycling charge was being collected appropriately; working with the MRC to understand its programmatic activities and offer guidance regarding statutory responsibilities. This approach would allow additional annual reporting data to be considered, as statute requires the baseline and goals to be established based, in part, on annual reports.
As such, CalRecycle disagrees with the draft audit report’s characterization of this issue, but agrees with the report’s recommendation that the Legislature consider adding explicit language in statute to clarify that CalRecycle may set these and other types of recycling-related goals (see Response #6 below) so that authority on this issue is clear.
2)
Page 19 Finding: “CalRecycle’s goals for mattress recycling
do not reflect statewide measurements of recycling activity.”
This finding, along with the first finding above, is linked to the recommendation on pages 23 and 35:
“By January 1, 2020, CalRecycle should update the baseline and goals for mattress recycling to reflect the most current available information it has related to the number of mattresses disposed of statewide. In addition, it should ensure that its recycling goals are statewide by including information about recycling and renovation from entities that do not contract with the Mattress Council.”
CalRecycle intends to establish a statewide recycling rate by July 1, 2020, however it believes the current recycling goals do provide a measure of statewide recycling activity. The MRC’s plan estimated, with a 90 percent confidence level, that 1.9 million mattresses
were disposed of in
landfills in 2014; similarly, page 8 of the draft audit report states an
estimated 2 million mattresses are discarded annually. CalRecycle’s
approved state mattress goals for 2017 are for 1.2 million mattresses to be
recycled and 150,000 mattresses to be renovated. The goals can be used as a
measure to gauge the program’s impact on the statewide recycling of
mattress. Using the approved goals (units renovated and units collected for
recycling) as the numerator and the estimated number of mattresses
discarded from the audit (adjusted to account for the 21 percent increase
in disposal from 2014 to 2017), achieving the goals in 2017 would mean that
at least 58 percent of the estimated number of mattresses discarded
statewide were collected for recycling through MRC’s program or were
renovated.
Achieving the approved goals in 2020, assuming disposal remains stable
between 2017 and 2020, would mean that at least 76 percent of the estimated
number of mattresses discarded statewide were either collected for
recycling through MRC’s program or renovated.
Page 3 of the draft audit report states that “CalRecycle’s goals will lead it to monitor the growth of the mattress program for the next three years but not the total statewide progress toward diverting mattresses from landfills – an approach that does not reflect the requirements or intent of the recycling act.”
As noted above, the goals do provide a measure of statewide progress. CalRecycle indicated in its November 2017 agenda item that the baseline and goals will be reviewed and potentially revised by July 1, 2020, a time period less than three years from the effective date of the initial baseline and goals. Further, CalRecycle is currently monitoring and will continue to closely monitor the statewide data as reported by mattress recyclers, renovators, and solid waste facilities that accept mattresses from the public as part of its ongoing oversight and implementation activities. According to data reported to CalRecycle, 382,925 mattresses were disposed of in landfills in 2017.
CalRecycle set goals in November 2017 based on authorizing statutes, the methodology contained in the MRC’s plan, MRC’s first annual report, and other verifiable data available at the time. The draft audit report’s recommendation on pages 23 and 35 are consistent with CalRecycle’s November 2017 public meeting agenda item cited above, in which CalRecycle explicitly stated its intent to review and update the goals by July 1, 2020. In particular, CalRecycle stated that it intends to establish a statewide recycling rate in 2020 based on a numerator of the number of mattresses reused, renovated, or recycled and a denominator of the total number of mattresses available for reuse, renovation, and recycling. This would use the best available data at the time, including data from entities not contracted with the MRC.
In order to facilitate improvements in data reporting by recyclers, renovators and solid waste facilities, CalRecycle has undertaken a number of efforts starting with the development and administration of a survey to assess the education and training needs of reporting entities (i.e., renovators, recyclers, and solid waste facilities). Based on the survey results and analysis of the data reported in the first year of the program, CalRecycle developed and conducted a custom training webinar to assist mattress recyclers, renovators, and solid waste facilities in preparation for the 2017 mattress annual reporting cycle. CalRecycle also provided extensive technical assistance to reporting entities regarding their reporting obligations, conducted extensive quality control and analysis on the reporting entities’ 2017 data, mailed violation notices to all entities that failed to report by the May 1, 2018 deadline, and proceeded with progressive enforcement actions for those entities. Subsequent to CalRecycle’s efforts, year two of the program saw a significant improvement in data reporting with 100% (9/9) of reports received from mattress recyclers, 93% (28/30) of reports received from mattress renovators, and 98% (382/389) of reports received from solid waste facilities. Improved data reporting is critical for CalRecycle to review and update the recycling goals by July 1, 2020.
3)
Page 23 Finding: “CalRecycle has not ensured that the Mattress
Council prioritize source reduction and provide budget
transparency.”
Regarding source reduction, the MRC’s plan (page 7) states it will advance California’s hierarchy through eight elements, the first of which is source reduction: “The mattress industry manufactures durable mattresses that reduce the rate at which discards are generated.” While the plan does address source reduction, as
acknowledged in the draft audit report on page 24, it is not clear that CalRecycle can require more specific details under existing statute (the draft audit report does not provide an explanation of what “prioritizing source reduction” means in addition to what MRC has included in its plan).
Despite the absence of such a requirement, the MRC’s 2016 and 2017
annual reports
state that source reduction was met by:
1) Manufacturing durable mattresses that reduce the discard rate;
2) Capturing discarded mattresses before they enter the waste stream or diverting them from the waste stream once they have been collected; and,
3) Reducing the volume of units by dismantling them and recycling as much of the component material as possible.
However, with the exception of 1) above, the MRC’s description of source reduction activities is not consistent with Public Resources Code (PRC) Section 40196. Furthermore, the MRC did not include information on the extent, if any, to which mattress durability was improved or provide associated metrics to track durability.
In its August 2018 analysis of the MRC’s 2017 Annual Report (which
was submitted on July 2, 2018), CalRecycle staff concluded that source
reduction activities must be consistent with statutory definitions and that
the MRC’s Annual Report should describe how the MRC’s
objectives are advancing the solid waste management hierarchy as described
in its Plan, with appropriate metrics.
CalRecycle staff also concluded that
the MRC must describe source-reduction activities it has undertaken and
provide a detailed description of planned future efforts to address the
source reduction requirement.
It is too soon to speculate as to what the MRC’s response will be if the director disapproves the 2017 Annual Report, as the MRC would have 60 days to revise and resubmit the report to address its deficiencies. However, this situation provides an opportunity to address the confusion in the draft audit report (pp. 25-26) on how CalRecycle’s regulations require resubmittal of a plan upon a significant or material change to the program. If, in order to remedy the reporting deficiency in the 2017 Annual Report regarding source reduction the MRC needs to adjust its program objectives or goals, any such change with regard to source reduction would likely meet the threshold of “significant or material,” and CalRecycle would be able to require MRC revise and resubmit its plan.
Regarding budget transparency, the level of budgetary detail is specifically required by statute and the implementing regulations. CalRecycle requests additional information that might be of interest but transmittal of this information from the MRC is not required by statute and the implementing regulations. For all approved budgets to date, staff determined that the statutory and regulatory requirements were addressed, and were approved accordingly. When necessary, CalRecycle requests additional detail for the MRC to demonstrate it can perform its statutory responsibilities. CalRecycle also requests additional information that will be helpful for the public to have a better and more transparent understanding of MRC’s budget, but there is no statutory or regulatory requirement that MRC submit this information. Therefore, while CalRecycle may make the request, it is up to MRC to determine whether it wants to volunteer the requested information.
In addition, the annual report approval process allows an additional opportunity for CalRecycle to request more robust information related to its budgetary activities. For example, in its August 2018 analysis of the MRC’s independently audited financial statements included in the 2017 Annual Report, CalRecycle staff noted that the MRC’s total net assets nearly doubled from 2016 to 2017 but that the MRC did not provide an explanation as to why the reserve grew substantially or a justification for carrying such a large reserve. The MRC stated that the reserve is intended to equal 12 months of what it projects it will spend in 2020, but it did not provide the 2020 expense forecast. CalRecycle staff therefore requested that the report provide information on “total net assets” to comply with the surplus funding reporting requirement, provide the 2020 projected expenses, and provide a detailed rationale for such a large reserve.
4) Page 28 Finding: “CalRecycle has not adequately enforced retailer compliance with the recycling act.”
CalRecycle recognizes that enforcement alone does not necessarily achieve compliance. Instead, CalRecycle’s progressive enforcement approach focuses first on assisting entities to achieve compliance, which has proven to be a much more successful model than issuing penalties at its first option.
Since 2016, CalRecycle has conducted statewide enforcement on mattress retailers and used a progressive enforcement approach to achieve compliance, consistent with other programs throughout CalRecycle. The approach consists of inspecting a business, preparing an inspection report, and then publically issuing the report. The report’s release is considered the inspection’s completion.
If violations are found at the time of the inspection, a notice of noncompliance is presented on the inspection report, an enforcement case is opened, and the business is given time to come into compliance. During this time staff sends notices of noncompliance to the business and notifies them of potential penalties for failing to comply. This “compliance through education” strategy is particularly beneficial for new programs and when working with small businesses. The strategy allows for the efficient and effective use of resources while successfully gaining compliance. Furthermore, the approach assures due process and allows CalRecycle to prioritize the most significant violations and utilize limited resources to have the largest impact
CalRecycle’s progressive enforcement process has been effective. Through these efforts, 116 retail businesses found ignoring or unaware of the laws, and the requirements to participate, are now registered with MRC. During this time, CalRecycle also undertook progressive enforcement efforts to address renovator and solid waste facilities failing to comply with reporting requirement, and subsequently 82 business came into compliance with the requirement to register in CalRecycle’s annual reporting system.
In the first year of the program (2016), CalRecycle focused on reaching businesses to educate them and to assure they registered with the MRC. Although inspections in 2016 showed approximately 30 percent of the businesses contacted were in violation of registration requirements, through staff’s progressive enforcement efforts, 98 percent of those businesses came into compliance with the registration requirement.
In the second year (2017), CalRecycle continued to focus on program registration and also evaluated compliance with the other required standards. Furthermore, CalRecycle focused on businesses MRC referred to CalRecycle that were thought to be out of compliance with the registration requirements. Of the businesses evaluated, 69 percent were found to be in violation of the registration requirements. CalRecycle’s progressive enforcement efforts resulted in 82 percent of the businesses achieving compliance with the registration requirement.
The follow-up on violations of other required standards did not occur
during the first two years due to the focus on registration requirements.
CalRecycle determined that once businesses are registered with the MRC, the
MRC tracks other standards such as the proper collection and payment of
fees. If MRC becomes aware of potential violations, it may refer the
business to CalRecycle for inspection and enforcement, as necessary.
Enforcement activities are prioritized in order to be the most efficient in gaining overall compliance. It is evident that prioritizing education and the opportunity for the business to understand the requirements and to voluntarily come into compliance has resulted in large gains in overall compliance.
On page 32, the draft audit report states:
“According to an extract of CalRecycle’s enforcement database we obtained in August 2018, CalRecycle identified 214 cases in which it will need to re-inspect to obtain evidence of compliance with the recycling act.”
CalRecycle did provide the audit team with this extract. However as is noted in the draft audit report CalRecycle’s database has limited capabilities. This specific extract contained 30 duplicative inspection numbers to account for businesses at a progressive enforcement phase. Accounting for these duplicates, the total number of business locations that require re-inspection is 184. We developed a new system in 2018 to track this information and negate the need for duplicate entries.
Having addressed this, CalRecycle is re-inspecting businesses that have not demonstrated compliance, and it will continue to do so. Businesses that remain in violation will proceed through the progressive enforcement process and violations will be resolved by the business achieving compliance or penalties will be pursued by CalRecycle. CalRecycle notes that it has finalized a Statement of Facts for a noncompliant business and the department’s Legal Office is preparing documents to proceed with legal action.
Finally, on page 33 the draft audit report makes the following statement:
“The enforcement manager noted that CalRecycle has given staff discretion to decide how to track when follow-up on inspection cases was necessary and that the supervisor reviews CalRecycle’s enforcement database to see if follow-up has stalled.”
For clarity, no inspector is provided discretion to decide when follow-up
on inspection cases is necessary. Once a violation is found, the inspector
is to provide timely follow-up. To manage and schedule this workload,
CalRecycle provides discretion to staff regarding the appropriate tool
(e.g., outlook calendar, spreadsheets, and database reports) to track and
maintain their workload.
5)
Pages 34-35: Recommendations to the Legislature
The draft report provides four recommendations to the Legislature for
amendments that focus on:
1) Requiring CalRecycle to establish additional goals (for encouraging
source reduction, increasing consumer convenience, and reducing illegal
dumping) by July 2020;
2) Limiting the time period for which the recycling plan is valid;
3) Requiring the MRC to submit with its annual budget any additional details that CalRecycle determines are reasonable for its effective oversight; and,
4) Prohibiting the MRC from spending the recycling charges it collects in a year for which CalRecycle has not approved the program’s budget.
CalRecycle agrees that these recommendations would help in administering the program.
Additionally, and as requested by the auditors, CalRecycle finds that additional statutory changes could improve the program and program outcomes:
a.
Remove “good faith effort” for the Mattress Recycling
Organization to comply with state recycling goals. PRC §42987.5(b)
.
Removing the requirement that a mattress recycling organization demonstrate
only the organization’s “good faith effort” to comply
with the state mattress recycling goals would allow CalRecycle to act more
quickly to address a mattress recycling organization’s poor
performance/non-compliance (i.e., for MRC) through statutory tools such as
penalties.
b.
Allow for greater transparency and communication with stakeholders. PRC
§42988.1
.
Currently, the annual report and annual budget must be submitted by the
Mattress Recycling Organization separately and must be reviewed and
approved, disapproved, or conditionally approved by CalRecycle separately.
CalRecycle is statutorily required to make those determinations within 90
days for the annual budget and 60 days for the annual report. Revising the
timeframe to make the determination for the annual report to be 90 days
would ensure adequate time for staff and stakeholders to concurrently
analyze and consider each document, particularly when complex programmatic
challenges must be considered.
6)
Pages 35-36: Recommendations to CalRecycle
The report first recommends that CalRecycle update the state mattress
recycling baseline and goals to reflect the most current available
information, and ensure that its recycling goals are statewide in scope by
including information about recycling and renovation from entities that do
not contract with the Mattress Council.
As explained above, CalRecycle plans to do so.
The draft audit report also outlined six recommendations related to
enforcement. The Recommendations and CalRecycle responses are as follows:
a. “Assess penalties for noncompliance with the recycling act.”
CalRecycle believes that progressive enforcement has been shown to be an effective and efficient process for gaining the compliance of mattress retailers. For those that remain out of compliance, the process to levy penalties is being implemented.
After two years of program implementation, the industry has a better
understanding of the program requirements and compliance has increased
accordingly. CalRecycle plans to continue to implement its progressive
enforcement process, with a focus on bringing businesses into the penalty
phase at a faster rate.
Additionally, the auditor has stated that CalRecycle has foregone a significant amount of potential revenue from penalties. Penalties are not the same as revenue, and shouldn’t be conflated. CalRecycle’s revenue to administer the program is already authorized by statute and is limited to the amount necessary to carry out the program. CalRecycle takes enforcement action to ensure compliance, not to obtain additional funding.
CalRecycle, through its enforcement efforts, has and continues to provide full notification to those businesses that may be subject to penalties. For those businesses that continue to be out of compliance, CalRecycle has not forfeited its ability to collect penalties for all days a business has been determined to be in violation.
The statute clearly states the amount of a penalty and the timeframe for which a penalty may be collected. However, as part of any action, the regulations clearly state that factors in section 14 CCR Section 18970 must be considered to determine the amount of the penalty. CalRecycle takes into consideration all factors to ensure the penalty assessed is consistent with the law.
b.
Publicize any penalties it assesses against violators of the
recycling act as a deterrent to potential violators.
Once issued, all penalties will be publicized by posting the final decision on the CalRecycle enforcement website, as required by Government Code Section 6253.8.
c. Monitor inspection cases to ensure that it does not close them before the retailers in question have remedied any instances of noncompliance.The finding of the draft audit report regarding the “closure” of an inspection before final compliance is determined appears to be a misunderstanding of the terminology used by CalRecycle staff during the interview process.
CalRecycle inspections are a “picture in time.” After staff conduct a site visit, the CalRecycle inspectors return to the office to write the inspection report, and then mail it to the business. Once the report is sent and received by the business, the inspection is “issued” and becomes part of the record. If violations occurred, a compliance (enforcement) case is opened and an enforcement case is complete only when compliance has been achieved.
d.
“Execute a plan to verify compliance for all inspections in which
it did not obtain evidence of compliance.”
CalRecycle has maintained a list of businesses that have not complied with registration requirements and businesses in violation of other standards.
CalRecycle is currently re-inspecting the businesses that continue to violate registration requirements. If those businesses are still in violation, an accusation will be pursued. Following the efforts on those businesses not registered, CalRecycle will be re-inspecting businesses that have not fully documented compliance with the other program standards. Noncompliant businesses will be prioritized based on severity of the violation and penalties will be pursued.
e.
“Develop and implement a timeline for the penalty phase of the
enforcement process.”
CalRecycle agrees that the penalty phase of the progressive enforcement process should be expedited now that the program is more mature. It is currently estimated that a compliance case with significant violations will be able to proceed to the penalty phase within one year of the initial finding of non-compliance. The most egregious cases will be prioritized to move through the process and the penalty phase. Priority will be on the businesses that have continued to fail to register with MRC and collect and pay the mattress fee.
f. Regularly review the timeliness of it enforcement process and prioritize any overdue enforcement actions based on its enforcement timelines.
CalRecycle agrees that this is an important part of any enforcement program and will continue to implement the ongoing procedures to review the enforcement process and set priorities.
Footnotes
1 https://www2.calrecycle.ca.gov/PublicNotices/Documents/8532 Go back to text
Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM THE CALIFORNIA DEPARTMENT OF RESOURCES RECYCLING AND RECOVERY
To provide clarity and perspective, we are commenting on CalRecycle’s response to the audit. The numbers below correspond to the numbers we have placed in the margin of its response.
We stand by the overall conclusion of our report, reflected in the report title, that CalRecycle has not provided the necessary oversight to ensure the mattress program fulfills its purpose. This conclusion is supported throughout Chapter 1 of our report, where we discuss how CalRecycle has not established key goals for the program that would significantly enhance its ability to determine whether the mattress program is meeting its legislative intent, how CalRecycle has not ensured that the Mattress Council prioritizes source reduction and provides budget transparency, and that CalRecycle has not adequately enforced retailer compliance with the recycling act. In each of these areas, we believe CalRecycle did not robustly exercise its authority as an oversight entity.
We believe our report stands on its own and disagree with CalRecycle’s belief that additional context and analysis would benefit our report’s utility.
CalRecycle asserts that our report recognizes CalRecycle’s lack of effective authority to acquire clear and concise data from industry and agrees that current statutory authority to establish certain program goals is unclear. Our report does not state that CalRecycle lacks the authority it references, and we do not state in our report that the law is unclear. Instead, in Chapter 1 we present the dispute between the Mattress Council and CalRecycle about its authority to set such goals. We include a statement on here from an attorney at CalRecycle who believed that CalRecycle’s authority is not explicit in statute. Therefore, in that same location we say that a clarification to state law that explicitly directs CalRecycle to develop program goals would help to resolve this dispute.
CalRecycle asserts that our report does not include a complete description of the department’s inspection and enforcement process. Our report contains the appropriate level of detail for readers to understand the findings and conclusions we present, and no additional detail is required.
During our fieldwork, we had conversations with CalRecycle’s staff in which we sought their perspective on our legislative recommendations. We did not request that CalRecycle provide its own legislative recommendations in its response to the audit report.
CalRecycle’s comments discount the importance of effective oversight to the success of the mattress program. As the entity designated by state law to be responsible for overseeing the program, CalRecycle plays an essential role in ensuring that the program fulfills statutory requirements and the legislative intent of the recycling act.
CalRecycle’s response uses page number references from a draft copy of our report. Since we provided CalRecycle the draft copy, page numbers have shifted.
CalRecycle is incorrectly using a statement from our report to support its position. We acknowledge in Chapter 1 that CalRecycle was hindered by poor data when setting the statewide recycling goals. This statement is specific to the statewide recycling goals and is not applicable to our discussion of program goals. CalRecycle’s response conflates these two discussions. Contrary to CalRecycle’s suggestion, our discussion in Chapter 1 presents our conclusion that CalRecycle had adequate information to establish program goals in the areas of increasing consumer convenience, reducing illegal dumping, and establishing source reduction as a priority for the program. Finally, CalRecycle indicates our draft report stated it set statewide goals in November 2017. Independent of CalRecycle’s response, to ensure clarity and consistency in our report we changed the date in this sentence to December 2017 to reflect the date Cal Recycle approved, not set, these goals.
Our report provides the appropriate context for our discussion of program goals. We note here that the recycling act does not explicitly require CalRecycle to establish goals related to ensuring convenience for consumers, reducing illegal dumping, and developing program objectives consistent with California’s waste management hierarchy, which prioritizes source reduction. However, we also note in the same location that legislative findings and declarations from the recycling act indicate the importance these areas held for the Legislature when it created the recycling act. Further, we note here that the Mattress Council believes that CalRecycle does not have the authority to set goals in these areas. Finally, we note here that CalRecycle has stated its intent to consider goals in these areas when it reexamines the recycling goals in 2020, and we include here the perspective of an attorney from CalRecycle that CalRecycle’s authority to set program goals is not explicit in statute and has been disputed.
Although CalRecycle believes that its current recycling goals provide it a measure of statewide recycling activity, they do not. As we discuss in Chapter 1, the goals CalRecycle established are based on the mattresses collected and recycled by the Mattress Council’s contracted recyclers only. Therefore, these goals do not reflect statewide mattress waste management. CalRecycle’s response indicates that it believes it can relate its goals to statewide mattress disposal activity by using estimates of disposals from previous years and applying a growth rate, a methodology that CalRecycle did not raise in its discussions with us during our audit and therefore we have not validated it. Nevertheless, if the goals it established were true measures of statewide recycling activity, the additional analysis CalRecycle describes in its response would not be required. Further, CalRecycle’s assertion that its recycling goals are a measure of statewide recycling activity is puzzling because—as we discuss here—CalRecycle has previously announced that it did not set a true statewide recycling rate.
CalRecycle’s response appears to quote our audit report. We believe CalRecycle is referring to text that appears here, which says: “The recycling act requires that the Mattress Council’s recycling plan contain program objectives that are consistent with the waste management hierarchy, which prioritizes source reduction.” We would expect CalRecycle to have ensured that the plan it approved contained content consistent with this requirement. Instead, as we state in Chapter 1, CalRecycle approved a plan that lacks a clear strategy for addressing the State’s highest priority in terms of waste management practices. Further, our report provides examples of how CalRecycle could have ensured an emphasis on source reduction. Elsewhere in Chapter 1, we discuss two possible source reduction goals that CalRecycle could have adopted: a specific amount of money that the Mattress Council would spend on research to find new ways to manufacture mattresses and also a goal of increasing the number of renovated mattresses over time.
Contrary to the assertion made by CalRecycle that the Mattress Council’s recycling plan contained information on how the Mattress Council would address source reduction, the plan does not do so. The recycling plan states that the mattress industry manufactures durable mattresses that reduce the rate at which mattresses are discarded. Although it was founded by an industry association, the Mattress Council does not manufacture mattresses and therefore the recycling plan does not discuss how the Mattress Council will advance source reduction. It merely makes an observation about the practices of mattress manufacturers. As we state on here, CalRecycle did not require the Mattress Council to clearly explain in its plan how it would advance source reduction.
There is no confusion in our report. In Chapter 1, we explain that CalRecycle’s regulations require the Mattress Council to resubmit its recycling plan for approval if a significant or material change in the mattress program occurs. However, program objectives that are consistent with the State’s waste management hierarchy—which places the highest priority on source reduction—have always been a required element of the recycling plan. The remainder of CalRecycle’s response related to this point relies on speculation as to how the Mattress Council will respond to CalRecycle’s request for changes to its 2017 annual report. This speculation cannot serve as evidence that CalRecycle will be able to use its regulations in the manner in which it suggests.
We do not recommend that CalRecycle issue penalties as a first option for obtaining retailer compliance with the recycling act. Rather, we recommend that CalRecycle do what it has not yet done up until this point, which is issue penalties upon reaching the penalty phase of its progressive enforcement process. As we indicate in Chapter 1, CalRecycle has established a multiphase inspection and enforcement process, which includes two 30-day periods—during which retailers can demonstrate compliance—that precede the penalty phase of its process.
In describing its efforts to ensure retailers are registering with the Mattress Council, CalRecycle presents a variety of information about the number and percentage of businesses it has inspected that have subsequently registered with the Mattress Council. We have not independently verified this information. Contrary to its assertion that its progressive enforcement process has been effective, CalRecycle’s response shows that it is focused on a single type of violation and suggests that it did not evaluate compliance with other requirements for the first year of the program. As we describe here, failure to register with the Mattress Council is not the only type of noncompliance that CalRecycle can identify during its inspections. In fact, we reviewed inspection records that showed retailers that had registered with the Mattress Council, but CalRecycle still found violations of other recycling act requirements when it evaluated compliance with them. Therefore, CalRecycle’s focus on one requirement fails to ensure that retailers comply with other vital elements of the recycling act.
During our audit, we verified with CalRecycle’s enforcement supervisor that 214 cases required reinspection according to the enforcement database. However, based on CalRecycle’s response, we reexamined the data it provided to us during the audit and removed duplicate entries from our total. We have made a modification to our report text to reflect this correction. This change does not affect our report’s conclusions or recommendations.
CalRecycle has taken a statement made by its enforcement manager out of the context in which we present the statement. In the context of our report, this statement does not require clarification. This statement appears in our report here. In the paragraph that precedes this statement, we describe our conclusion that the compliance unit has not carried out enforcement actions in a timely manner. In the next paragraph, we include the enforcement manager’s statement that CalRecycle has given staff the discretion to decide how to track when follow up on inspection cases was necessary. We then continue on in that same paragraph to discuss how CalRecycle plans to update its enforcement database to include automated reminders for staff and the supervisor about key impending dates. Therefore, in its full context it is clear that the enforcement manager was speaking about the discretion CalRecycle gave its staff to choose their own workload management tool.
CalRecycle’s assertion that inspection cases have not been considered complete until compliance has been fully documented is false. As we explain in Chapter 1, we found that CalRecycle completed inspections without obtaining evidence that retailers had corrected their noncompliance. We also include an acknowledgement by the enforcement manager that the compliance unit completed some inspection cases without evidence of compliance.
CalRecycle indicates that it plans to address our recommendation but has not completely quoted the recommendation in this area of its response. Elsewhere in its response, CalRecycle fully quotes our recommendation which directs CalRecycle to update the statewide mattress recycling goals by January 1, 2020. In that location, CalRecycle states its intention is to establish a statewide recycling rate by July 1, 2020. Therefore, it is not clear whether CalRecycle plans to adhere to our recommended timeline for updating its goals, and we look forward to hearing more from CalRecycle when it provides its responses to our recommendations 60 days, six months, and one year after the publication of this report.
We do not conflate penalties and revenue. As we describe in Chapter 1, the recycling act requires CalRecycle to use all penalty revenue it collects to administer and enforce the act’s provisions. The other revenue source CalRecycle has available for its oversight of the recycling act is the reimbursement it receives from the Mattress Council, which is paid for out of the mattress recycling charge paid by consumers. Therefore, any revenue collected from penalties would offset the amount of funding CalRecycle uses from the mattress program.
We did not misunderstand CalRecycle’s staff. Our report generally uses the term complete to describe inspection cases that CalRecycle concluded. In Chapter 1, we describe an update CalRecycle made to its procedures in April 2018 and use the term close in that instance because it is the term that appears in CalRecycle’s procedures. The recommendation in our draft report also used this term. However, to avoid further confusion on CalRecycle’s part during its 60-day, six-month, and one-year responses to this recommendation, we have adjusted the wording of our recommendation on here to use the term complete instead of close.
CalRecycle indicates that a compliance case with significant violations will be able to proceed to the penalty phase within one year of the initial finding of noncompliance. However, CalRecycle’s response does not directly address our recommendation here that CalRecycle develop and implement a timeline for the penalty phase of the enforcement process. We look forward to hearing more from CalRecycle about how it is addressing our recommendation when it provides its responses to our recommendations 60 days, six months, and one year after the publication of this report.