Pearl Harbor's 'Recycling' Program Wins Dishonorable Mention from GAO

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The U.S. General Accounting Office, to whom Congress turns when it has questions on federal programs has examined recycling programs at several military bases. In 1982, Congress allowed the Department of Defense to use proceeds from its recycling programs to cover the costs of recycling, to help pay for environmental and safety projects, and to defray costs of Morale, Welfare and Recreation (MWR) activities. Here in Hawai’i, MWR programs include the operation of golf courses as well as the staging of the annual hydroplane races in Pearl Harbor.

“We found widespread abuse in DOD’s recycling program,” the General Accounting Office told the House Committee on governmental Affairs’ subcommittee on oversight and government management.1 “Millions of dollars are being used annually for MWR activities that should be used instead to offset the need for appropriated funds or be returned to the U.S. Treasury. This is occurring because military bases are routinely receiving money from the sale of aircraft, vehicles, and other materials that DOD policy specifically excludes from the recycling program and then are using the proceeds to fund MWR activities. Although the purpose of the program is to reduce the volume of items going to the waste stream, about 90 percent of the program’s proceeds appear to represent excluded items and items that would not go into the waste stream.”

Commander Mark Claussen, with the Pearl Harbor Naval Base, says that the problems identified by the GAO were overblown and that, in any case, since the GAO report was issued, the Recycling Center at the Pearl Harbor Naval Base has been reformed.

Past Abuses

Legal responsibility for the Department of Defense’s recycling program rests with the Defense Logistics Agency’s Defense Reutilization and Marketing Offices (DRMO). However, at several installations, including Pearl Harbor Naval Base, the GAO found that the DRMOs are being bypassed and recyclable and other materials are being sold directly to private buyers. “This practice,” the GAO wrote, “has resulted in millions of dollars being diverted from industrial funds, the U.S. Treasury, and the Defense Business Operating Fund to MWR activities.” The Pearl Harbor Naval Base, the report states, set up its own recycling center in September 1991 and, as of March 31, 1993, it “had received over $500,000 from direct sales.” In addition to such recyclables such as paper, glass, and cardboard, the GAO found Pearl Harbor officials routinely selling ship parts and scrap metal.

Nor do the proceeds from this “recycling” pay even for the costs of the recycling program. The GAO found that at Pearl Harbor, “appropriated funds” – that is, taxpayer money “had been used to pay recycling program costs of $50,939, which had not been reimbursed by the recycling program office. This figure included $44,430 for start-up materials and equipment costs paid for by the Public Works Center with appropriated funds.”

Lack of Oversight

The Department of Defense Inspector General looked at the recycling programs in 1991, the GAO reports, but did not always complete his review and “did not report the program abuses we identified.” In addition, the GAO writes, the “Pearl Harbor Naval Base Command Evaluation staff reported in August 1992 that the internal controls for the recycling program were adequate. However, our review found deficiencies in internal controls related to virtually all aspects of the program.

That lack of oversight at Pearl Harbor, the GAO goes on to say, “enabled the recycling manager to rent space – in a government building to a private corporation and deposit the rent into the recycling program account. In addition, at Pearl Harbor, items were turned into the center without the center always providing receipts, which is a basic control over how much the center received.”

A ‘Solid Success’?

In its response to the GAO report, the Department of Defense described the recycling programs as “an important part of the DOD total solid waste management effort… a solid success that have benefited the Department and the civilian communities.” The problems identified by the GAO, Defense claimed, “are not typical of DOD’s recycling program.” The GAO then expanded its review of Defense recycling programs – and, it reports, “at all locations, we found abuses.” The report continues: “In addition, we had numerous meetings with Defense Logistics Agency personnel who confirmed that the abuses in this report were widespread.”

As noted in the report, the Defense Department had not updated its guidelines for recycling since the 1982 law was passed. In 1991, the Defense Department prepared a draft, but that was never released; according to the GAO, “Certain Defense Logistics Agency managers believed the proposed guidance would hurt the relationship built between the installations and DRMOs and would preclude installations from receiving millions of dollars for the MWR activities to which they had become accustomed.”

In September 1993, the Department of Defense issued a new memorandum on recycling that addresses the matter of valuable scrap metal being sold as “recyclables.” Rather than excluding the scrap metal, the DOD now blesses it as part of the waste stream to be included as part of the recycling program.

The GAO commented on the new policy: “We question whether items that have not normally been part of the waste stream, such as ferrous and nonferrous metals and fired brass … should be included in the recycling program. Such items do not seem to fit the definition of recyclable material cited elsewhere in the policy as materials diverted from the solid waste stream.

Trying Again

In April 1994, the Naval Facilities Engineering Service Center, based in Port Hueneme, California, issued another “Qualified Recycling Program (QRP) Development Guide.” “Proceeds from the sales of government purchased ‘personal property”‘ that is, any property other than real estate – “are closely monitored to determine in which of many accounts they must be deposited,” the guide states, adding: “It is not easy.”

At Pearl Harbor, certain changes have occurred in the Navy’s recycling program since the GAO report was issued. The Defense Reutilization and Marketing Organization (DRMO) sells all of the reusable personal property. It also engages in recycling of some of the more valuable scrap materials (such as metals) derived from government-purchased goods. Funds from the sale of this scrap are returned to the U.S. Treasury.

The base recycling program operates as a consolidated recycling center for practically all other programs sponsored by the Navy. According to Commander Claussen, proceeds from this operation are used first to recover overhead costs. What remains is distributed to the individual Morale, Welfare and Recreation funds of the participating groups (including, for example, the submarine base, the shipyard, and the several home-port ships) or to the treasuries of base-sponsored organizations (child care, Cub Scouts, Girl Scouts, and the like). Time for processing payments to the participants is just 21 days, the Recycling Center says.

From October 1, 1993 through March 31, 1994, the recycling center took in $200,039 from sales of 1,014,248 pounds of materials diverted from the waste stream.

Had these materials been landfilled, the Navy estimates, the cost to the taxpayers would have been $40,570.

Room for Improvement

The other recycling program at Pearl Harbor is the one run by the DRMO, responsible for sales of material salvaged from government-purchased property. According to information provided by the Navy, the DRMO is not getting top dollar for its scrap. The paperwork associated with its recycling program and the length of time required for participants to receive eventual payment (as much as a year or longer) are other inefficiencies that contribute to poor participation.

For example, on April 6, 1994, the Naval Base Recycling Program signed a contract providing for the sale of aluminum scrap for 35.14 cents a pound. One day later, DRMO awarded a contract for the sale of aluminum scrap at 12.34 cents a pound – barely a third of the Recycling Centers price. The Recycling Center attributes the differences to the facts that “(1) we segregated and separated the materials when possible (i.e., stripped copper cable, separated clean, painted, and iron aluminum, and cut the steel ends off of copper radiators) and (2) the resultant profits from the sales will take us only 21 days to return to our program participants while DRMO takes 24 in excess of one year.”

One might still question why the Recycling Center is selling off such valuable items as copper radiators. According to its manager, Mark Wells, last November, the Department of Defense required it to obtain permission from the Defense Logistics Agency to do so which it has done. However, Wells wrote, “there is still a lot of pressure from DLA (DRMO’s boss) for them to sell our recyclables, especially scrap metal.”

1 See “Widespread Abuse in Recycling Program Increases Funds for Recreation Activities,” GAO/NSIAD-94-40 (December 1993).

— Patricia Tummons

Volume 4, Number 12 June 1994

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