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California Department of Resources Recycling and Recovery
It Has Not Provided the Oversight Necessary to Ensure That the Mattress Recycling Program Fulfills Its Purpose

Report Number: 2018-107

Summary

AUDIT HIGHLIGHTS

Our audit of the mattress program concluded the following:


Results in Brief

The Legislature enacted the Used Mattress Recovery and Recycling Act (recycling act) to reduce illegal dumping, increase recycling, and substantially reduce public agency costs for the management of discarded mattresses and box springs (mattresses). Effective January 2014, the recycling act established a framework for a mattress recycling program (mattress program) using an extended producer responsibility (EPR) approach. Under an EPR approach, product manufacturers or other industry groups are responsible for operating a program to recycle or safely dispose of products consumers no longer want. In this instance, the Mattress Recycling Council (Mattress Council)—a nonprofit entity founded by a mattress trade association—operates the mattress program. To pay for the mattress program’s costs, the Legislature authorized the Mattress Council to collect a recycling charge, which is currently $10.50, from each consumer who purchases a new mattress in California. Effective oversight of the Mattress Council—a nongovernmental entity—is crucial to ensure that it uses the funding it collects from consumers effectively so that the State can realize its goals for waste diversion. However, the California Department of Resources Recycling and Recovery (CalRecycle) has not provided the oversight necessary to ensure that the mattress program’s performance aligns with legislative intent and that the State meets its mattress recycling goals.

CalRecycle did not establish goals for the mattress program in three critical areas: increasing convenience for consumers, reducing illegal dumping of mattresses, and ensuring consistency with the State’s overall approach to waste management, which prioritizes source reduction. According to the supervisor of CalRecycle’s EPR unit, CalRecycle did not have sufficient data to set goals in these areas. However, legislative findings and declarations indicate the areas’ importance, and we believe that CalRecycle could have set goals related to them based on the available data. For example, it is unclear what additional data CalRecycle needed to create goals related to the mattress program’s convenience other than the information to which it already had access: publicly available census data and the mattress program locations at which consumers could drop off used mattresses. By not setting these goals, CalRecycle missed a critical opportunity to ensure that the Mattress Council’s implementation of the mattress program aligns with the legislative intent behind the recycling act.

Further, the recycling act required CalRecycle to develop state goals for mattress recycling by January 2018. However, CalRecycle set goals that do not encompass recycling activities statewide but rather focus on only those mattresses that the Mattress Council’s contractors collect. As a result, CalRecycle’s goals will lead it to monitor the growth of the mattress program 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. CalRecycle indicated that it chose these more limited goals because the data it collected about statewide mattress recycling and disposal in 2016 were not complete enough to use to establish statewide goals. Although we acknowledge that poor data hindered CalRecycle from establishing a true statewide goal in 2017, it has since collected improved data, which positions it to set true statewide recycling goals in the future.

In addition, CalRecycle has not taken adequate action to ensure that mattress retailers comply with the requirements of the recycling act. Under the recycling act, retailers are required to perform specific actions, such as registering with the Mattress Council, collecting recycling charges from consumers, and remitting the charges to the Mattress Council. CalRecycle conducts inspections of mattress retailers, renovators, and manufacturers to ensure their compliance with these requirements. We found that although CalRecycle identified violations in 74 percent of the 285 inspections in which it made compliance determinations from March 2016 through February 2018, it did not levy administrative penalties against any violators. When we examined five cases in detail, we estimated that the potential total penalties in these cases would have ranged from roughly $280,000, if each penalty were assessed at the maximum allowed by the recycling act of $500 per day for unintentional violations, to about $2.8 million, if each penalty were assessed at $5,000 per day, the maximum amount allowed for intentional, knowing, or reckless violations. Because it has chosen not to assess any penalties—even in a case of multiple violations—CalRecycle has not ensured compliance and has gone without penalty revenue that could defray its administrative costs.

Although the Mattress Council has collected millions of dollars in revenue from California consumers to operate the mattress program, it has used a significant portion of this revenue to amass a reserve rather than spending the funds to ensure that the mattress program achieves the program goals. At the end of December 2017, the Mattress Council had already accumulated net assets of more than $42 million—an amount that is about equal to 12 months of the mattress program’s budgeted expenses. Our analysis suggests that this amount is much higher than necessary. Further, California’s paint EPR program, which CalRecycle also oversees, defines its reserve as an amount equal to six months of expenses, and the Government Finance Officers Association of the United States and Canada recommends government organizations establish a minimum reserve of two months of expenses. Although the recycling act does not currently prohibit the Mattress Council from accumulating its existing level of net assets, the law intends the Mattress Council to operate the program over a multiyear period in a prudent and responsible manner. We believe it can do so with less in reserve than it had at the end of 2017.

Finally, the Mattress Council has built up its net assets and cannot demonstrate that it met key objectives of the mattress program. For example, the legislative intent of the recycling act was for the Mattress Council to implement a convenient program to collect and recycle used mattresses in California. In its mattress recycling plan, the Mattress Council indicated that within the first year of the program it would identify one permanent mattress drop‑off site or hold at least one collection event annually in every county in California. However, as of June 2018, seven out of 58 counties did not have permanent drop‑off sites. Although the Mattress Council has held at least one collection event in most of the seven counties that are without permanent drop‑off sites, these collection events are not as convenient for consumers because they are time‑limited. Our analysis found that 700,000 residents in the San Francisco Bay Area are without convenient access to permanent drop‑off sites. Further, in two key areas the Mattress Council cannot demonstrate that it operates a cost‑effective program to recover and recycle used mattresses in California. Specifically, the Mattress Council has not established measures of success in the key program areas of consumer awareness and research on new technologies. Therefore, it cannot show that its spending in those areas has been effective. Although state law does not specifically require the Mattress Council to institute measures of success in these areas, the Mattress Council cannot demonstrate that its spending is achieving the intent of the law without such measures.

Selected Recommendations

Legislature

The Legislature should amend the recycling act to require CalRecycle to establish goals for the mattress program that relate to increasing consumer convenience, encouraging source reduction, and reducing illegal mattress dumping, as well as for any other areas that CalRecycle identifies as critical to the mattress program achieving the intent of the recycling act. It should require CalRecycle to establish goals in the first three specified areas by July 2020.

The Legislature should amend the recycling act to require the Mattress Council to maintain a reserve equal to no more than six months of the mattress program’s budgeted expenses. Further, the Legislature should amend the recycling act to provide CalRecycle the ability to direct the spending of any amount of funding that the Mattress Council accumulates over this amount or to adjust the mattress recycling charge.

The Legislature should amend the recycling act to require the Mattress Council to include in its recycling plan measurable goals in the areas of consumer awareness and research on new technology. Further, the Legislature should require that the Mattress Council’s annual report include information about the mattress program’s progress toward meeting these program goals.

CalRecycle

By January 1, 2020, CalRecycle should update its goals for mattress recycling to reflect the most current available information it has on mattresses disposed of statewide. In addition, it should ensure that its recycling goals are statewide in scope by including information from entities that do not contract with the Mattress Council.

In order to bring violators of the recycling act into compliance, CalRecycle should assess penalties for noncompliance with the recycling act.

Agency Comments

CalRecycle indicated that it agreed with the recommendations we made to the Legislature. CalRecycle disagreed that it had not exercised sufficient oversight of the mattress program. In response to most of the recommendations we made to it, CalRecycle did not indicate clearly whether it agreed with or planned to implement the recommendations.

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