Report 2014-110 Recommendation 5 Responses

Report 2014-110: California Department of Resources Recycling and Recovery: The Beverage Container Recycling Program Continues to Face Deficits and Requires Changes to Become Financially Sustainable (Release Date: November 2014)

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

To ensure it effectively uses resources, CalRecycle should renegotiate its agreement with the California Department of Justice (Justice) to pay based on the cases CalRecycle refers, limiting costs to investigations over a predefined period of time. CalRecycle could agree to increase the budget for a particular investigation if Justice demonstrates that it has developed promising leads.

Annual Follow-Up Agency Response From October 2018

CalRecycle evaluated the data and work the Department of Justice (DOJ) provided from the past DOJ contract. CalRecycle used this information in order to determine if there was a better way to identify the return on investment along with the effectiveness and efficiencies of each investigation. CalRecycle incorporated the lessons learned from its work with DOJ and the recommendations from the State Auditor when developing the next contract.

On June 27, 2017, CalRecycle entered into a new contract with the Department of Justice from July 1, 2017 through June 30, 2020. In order to ensure effective use of resources, the new contract added this specific language:

1. DOJ and CalRecycle will work together to prioritize referrals by potential harm to the Beverage Container Recycling Fund, expected time commitments on priority cases, an opportunity for both DOJ and CalRecycle to provide input on referral cases, and develop a written protocol for communication and information sharing.

2. The Quarterly Status report will include Attorney General Statistics.

3. DOJ will compile documentation that summarizes the overall DOJ arrests over the contract period and captures restitution ordered, evidence seized, and estimated fraud amounts of each case.

Since the beginning of the new contract, CalRecycle has ensured that DOJ has adhered to the new language. DOJ has provided the necessary data in order to ensure the continuous review of the effectiveness and efficiency of the contract by CalRecycle.

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

Although CalRecycle's revised contract with the Department of Justice (DOJ) does not specifically address our recommendation, we believe that its actions resolve our overall concern. Specifically, as indicated on pages 36 and 37 of our report, our concern was that CalRecycle paid DOJ significantly more to investigate criminal activity than the financial recoveries that resulted from those efforts—in particular, we indicated that DOJ's investigations resulted in a return of less than 3 cents for every dollar paid to DOJ. Further, we noted that a single investigation could span multiple years. Thus, our recommendation was that CalRecycle pay based on the cases it refers to DOJ, limiting costs to investigations over a predefined period of time. CalRecycle could agree to increase the budget for a particular investigation if DOJ demonstrated that it has developed promising leads.

The revised contract calls for increased collaboration between CalRecycle and DOJ to prioritize investigations and establish expected time commitments on cases. The contract also requires DOJ to provide quarterly status reports that include, among other things, a budget summary, closed case summary, and number of arrests. Further, CalRecycle will review the performance of the agreement at the end of each fiscal year to ensure it is meeting the intended goals.

Annual Follow-Up Agency Response From October 2016

The construct outlined in CSA's recommendation for a renegotiated interagency agreement (IA) has been deemed unfeasible by both CalRecycle and DOJ. CalRecycle believes DOJ's past efforts are more significant than what was listed in the BSA Audit Report. CalRecycle will continue to work with DOJ under the existing interagency agreement construct to develop evidence based benchmarks to better capture results of their efforts. CalRecycle will also evaluate appropriate objectives and lessons learned from its work with DOJ when developing the next IA.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement

1-Year Agency Response

The construct outlined in CSA's recommendation for a renegotiated interagency agreement has been deemed unfeasible by both CalRecycle and DOJ. CalRecycle believes DOJ's past efforts are more significant than what was listed in the BSA Audit Report. CalRecycle will continue to work with DOJ under the existing interagency agreement construct to develop evidence based benchmarks to better capture results of their efforts. CalRecyle also will evlauate appropriate objectives and lessons learned from its work with DOJ when developing the next IA.

California State Auditor's Assessment of 1-Year Status: Will Not Implement

We stand by our recommendation. As we further describe on pages 36 through 39 of our audit report, CalRecycle pays Justice significantly more to investigate criminal activity than the financial recoveries that result from its efforts. CalRecycle provided no evidence to support its claim that Justice's past efforts are "more significant" than what was listed in our final report. Nevertheless, we are pleased that CalRecycle sees value in better demonstrating the financial return to the beverage program resulting from Justice's investigations.

6-Month Agency Response

At the quarterly meeting on April 22, 2015, both DOJ and CalRecycle discussed development and capture of improved performance metrics to highlight both the efforts and impacts of DOJ's investigations. Additionally, on May 20-21, CalRecycle will host a two-day workshop with representatives from Department of Justice/Bureau of Investigation and the Attorney General's Office. The workshop will identify issues and opportunities for enhancing our collective ability and authority to effectively combat beverage container program fraud associated primarily with the importation and subsequent illegal CRV redemption of out-of-state beverage containers.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

CalRecycle & DOJ will continue our efforts to collaborate and pursue collective success under the terms, conditions and funding mechanisms in the current interagency agreement. CalRecycle will revisit this CSA Audit recommendation for potential implementation at the end of the term of the current interagency agreement which is currently June 30, 2017.

California State Auditor's Assessment of 60-Day Status: Pending

We stand by our recommendation. As we further describe on pages 36 through 39 of our audit report, CalRecycle pays Justice significantly more to investigate criminal activity than the financial recoveries that result from its efforts.

All Recommendations in 2014-110

Agency responses received are posted verbatim.