A state audit criticized the handling of Hawai'i's new bottle law yesterday, charging that adminstrators are not adequately tracking millions of dollars flowing through the program and not addressing consumer complaints.

In the first audit since Hawai'i residents began redeeming 5-cent beverage container deposits in January, state auditor Marion Higa documented that defrauding the program is easy and that the state Department of Health has poor controls against abuse.

The 72-page audit validated consumer complaints about poor service and lack of availability of redemption centers.

"Immediate steps must be taken to improve the program's operational and financial management and public education to ensure its future," the audit said.

The audit recommended establishing and enforcing standard levels of service, educating the public about program changes and encouraging redemption center competition.

The Health Department said it is working on some of the audit's recommendations and rebutted some audit conclusions that it characterized as "excessively harsh."

"The program has come a long way in a short time," said Larry Lau, state deputy director of environmental health. "We had been making improvements, and we will continue to make improvements."

One fact the Health Department has reported to prove the program's effectiveness is a redemption rate that has averaged around 80 percent since July.

OPEN TO ABUSE

But the audit questioned the accuracy of that Health Department statistic, saying the department doesn't know if distributors have underreported containers sold or if redemption centers over-reported containers redeemed.

"We observed and experienced many examples of inaccurate transactions," the audit said. "This is a major weakness of the system that is susceptible to exploitation and abuse."

Auditors redeemed containers at 33 of the state's 57 redemption centers between May and October. In 16 of the visits, auditors gave redemption center employees an exaggerated count of how many containers were being redeemed, and were overpaid in all but one instance.

The audit cited an example of getting paid for 50 containers when redeeming only 40.

Consumers give their count of the number of bottles they are returning to redemption center employees and the employees don't always verify those counts. Redemption centers have the option to weigh containers when a person redeems 50 or more bottles.

In two visits, auditors were paid for containers lacking the required HI-5 label.

"Potentially, the (state) could be paying the redemption centers for nonexistent and unlabeled containers," the audit said.

The Health Department said in its response to the audit that it has accounted for every penny in the program. Lau added that the department is drafting accounting procedures to verify the accuracy of redemptions.

Rodney Robello, a recycler at a Reynolds Recycling redemption center on Beretania Street, estimated that about 40 percent of people who count their own containers inflate their count either inadvertently or purposefully.

Because of the problem, Reynolds lost money when the state reimbursed the company based on the weight of containers redeemed, according to Michael Cacho, head recycler at the Beretania center.

To eliminate the discrepancy, Reynolds began weighing all consumer redemptions, which created longer lines at centers and complaints by consumers who felt they were underpaid for smaller containers that weigh less. So Reynolds resumed accepting consumer counts for redemptions of fewer than 50 containers and has been scrutinizing more counts.

"Now people are a little more conscious because they know we are watching more," Robello said.

But not all redemption centers follow similar procedures, which was another criticism of the audit that said a lack of consistency at centers has created public frustration.

PROCESS 'CONFUSING'

For instance, some centers accept containers from consumers in bags, while others require customers to dump containers into a plastic bucket provided by the center. Only some require glass to be sorted by color. And some impose daily limits on the number of containers a person can redeem, though the limit ranges by center.

"The process was confusing," the audit said.

The audit also confirmed consumer complaints about centers opening late, closing early, having long lines and an absence of "a basic level of customer service."

Auditors visited eight redemption centers before their advertised opening times either in the morning or after lunch, and found that five failed to open on time. Some customers, the audit said, waited 15 to 60 minutes for centers to open.

The audit criticized the Health Department for little effort to resolve problems, specifically by not fining redemption center operators when they deviate from contract obligations.

The department responded that it does pay attention to public complaints, acknowledges the need for redemption centers to operate better and is hiring a marketing and media consultant.

Also, Lau said complaints or inquiries to a program hotline have dropped from 850 in January to about 50 in July, and that the number of recycling centers has improved to 74 from 46 in January.

The department plans to conduct a consumer survey, and has solicited bids for a contractor to help improve customer service, Lau added. "We will keep working on consumer convenience," he said.

Lau noted that operators have been given reasonable leeway because they were hired to start a new business without much experience.

RULES OFTEN CHANGE

Nancy Moe, a Kane'ohe resident who recycles twice a month at the Beretania redemption center, said that over several months she's noticed an improvement in the center not being closed during posted operating hours, but that she never knows what to expect regarding redemption rules.

"It always changes," she said. "Every time something is new."

Mike Kahn of Makiki said redemption limits, slow processing, and spotty operating hours are frustrating.

"If the container gets full, sometimes they cannot answer when the next container will come," Kahn said.

Cacho of Reynolds said the Beretania operation used to close at 3 p.m. on a typical day because the shipping container storing redeemed bottles would fill up. Now that is rare, according to Cacho, who said a limit of 1,000 containers per customer, better staffing and improved processing helped address the problem.

Cacho also said the center stopped closing during lunch.

The audit said some of the redemption centers, especially on the Big Island and Maui, are "exceptionally well run." Others, mainly on O'ahu and Kaua'i, have numerous problems.

To help with program oversight, the Health Department is hiring a solid waste coordinator as well as two inspectors who will join three already on staff in an effort to ensure operators do a good job.

The bottle law is scheduled for re-evaluation in August, including a review of its reserve fund that holds about $16 million. Other efforts to improve the program seek to require grocery stores to redeem containers.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.