Senate Standing Committee on Health and Human Services

Calling the informational briefing for the Committee on Health and Human Services. Present with me is Senator Kurt Fevella.

So, we—this hearing is to discuss the audit by the Office of the Auditor, on June, the latest audit, June 30th, 2024, released on May 2025, and his recommendations and results of such audit and the Department of Health's response to said audit and hopefully some projections as to what to expect prior to the next audit two years from now.

So, with that, Les Condo, State Auditor, please make your presentation.

Good afternoon, I'm Les Condo. I'm the State Auditor to maybe set—reset—some expectations. We didn't have recommendations in this report. So, I will talk about recommendations that we made in an earlier report, some of which were codified. But in terms of what we did this last report, it was really to assess implementation of prior recommendations.

But I wanted to talk a little about the program. This program established in 2002 to increase recycling and to reduce litter. So, the statute, it requires us to audit the program, which includes the deposit, beverage container deposit special fund, to audit the fund and the program every two years, every even year.

The special fund was created to hold the fees, the deposits, and the accrued interest—monies that are used to pay refunds, to pay program fees, as well as handling fees. So, in accordance with the statute, we have issued our first report in 2005 and since then have issued nine different reports, every two years, roughly nine different reports.

The last of which, which the Senator referenced was, was issued earlier this year. I want to really quickly touch on how the program operates. The program has two different parts. The first part at the top, it's the deposit collection process, and the second part, the lower half of the slide, it's the redemption process.

Distributors, they deposit $0.05, the deposit of $0.05 plus $0.01 handling fee, they deposit that into the special fund. They deposit it through the Department or through the program. That amount of money that the distributors deposit that is recovered to them or recovered by them through the retailers and ultimately, through the consumer.

In fact, you may not see this on your receipts when you buy bottles and cans of soda or beer or whatever other kind of a kind of container that's subject to this law. But you should see a 6-cent fee that is, that is added to the cost of your beverage and your beverage container.

So, that is the 5 cent plus the 1 cent handling fee that the law requires the distributor to pay into the fund. The bottom half of the process is the redemption process. The customer or the consumer, we bring our bottles and cans, we bring that to a redemption center.

And the redemption center, either by counting each of the bottles or cans, or probably most frequently by weight, they will reimburse or refund the deposit that the consumer has paid.

And the redemption center then submits a request for reimbursement to the Department or to the program for reimbursement of the monies that they paid to the consumer, plus the $0.01 handling fee. They request that to be paid out of the special fund. This is a graphic from an earlier report.

Our 2020 report, I'm not sure if it is accurate today, but in 2020, there were 67 redemption centers across the state.

And also, in that report in 2020, we reported that the program had shown a reduction in the redemption rate, which is the top part of that, as well as an increase in fund balance over the course of the fiscal years from FY '26 through FY '20.

When the program was established, the goal or the aim was to recover 80% of beverage containers that were subject to the law. This is a more current balance of the special fund all the way through the end of the last fiscal year, FY '25, which ended June 30 of this year.

So, as you can tell from the graphic, the Special fund continues to grow. Last year, or between FY '24 and FY '25, the Special Fund increased by over $12 million. So, these are kind of the findings. I'll go through them relatively quickly. The findings have pretty much been consistent throughout the different reports that we have issued when we've looked at this program.

Really what we, what we've reported is the program is really a program in name only. Very little structure, no internal controls or processes to ensure that they achieve their mission, entirely reliant upon self-reported numbers without any verification process. It's really an honor system—operates as an honor system.

Here's some of the language from the report itself. We're saying that Department cannot verify the distributors are paying what they are owed for the redemption centers. The payments are made based on numbers submitted by the redemption center not verified by the Department. 2012 said basically the same thing. The fifth audit of the program, program relies on self-reported data from distributors that may be fraudulent or erroneously underreporting with respect to the redemption center.

Program continues to rely upon their unverified numbers, self-reported numbers. Continues to be at the risk of being there's a fraud risk.

And actually, in this year, 2012, when we looked at this report, we looked at a number of distributors and one of the distributors, Whole Foods, we determined that they were underpaying into the program. Instead of paying 6 cents per beverage container, they were paying 6 cents per case. And that had been going on from fiscal year—I'm sorry, it was about a six year period.

It had been under reporting and underpaying what they were supposed to put into the Fund. The state ended up settling with Whole Foods for about a two and a half year period. $46,198 is what the state received from Whole Foods.

Whole Foods represented that was the amount that they should have paid from July 2012 through December 20—2014. So, about a two and a half year period, yet this issue was ongoing for about six years. In 2016, again, another report, same thing. We found the same thing, that this was basically an honor system.

This program was run as an honor system, dependent entirely on self-reported data. In 2016, same, same report, we found that, again, no procedures to verify or any data to or any process to inspect data that was submitted by the distributors, even after finding that Whole Foods had provided inaccurate information and not paid the required amounts.

The audit before, two years before, we also found, again, program not requiring redemption centers to provide any supporting records for the amounts that they reported and they sought reimbursement. In the same year, the CPA firm that we had hired to perform the audit, they did a secret shopper exercise.

So, what we did in the prior year, in 2012 and again in 2016, those, what we did, looking at the distributor records and now looking at the redemption center doing a secret software exercise, those are really management activities.

We were doing management's work because management didn't have a program established and there was really nothing for us to look at or audit. So, the CPA firms that we had hired, they went ahead and they did some extra work that really is not our responsibility or their responsibility. In 2016, this firm did some secret shopper activities.

So, what they did is they visited 10 of the 67 redemption centers and five of the 10 they visited two times. Just random, random selection. There's one of the redemption centers, Reynolds Recycling at University Avenue. What they did is they visited them two times. They were one of the redemption centers that were selected for two visits.

The first visit, every redemption center, the CPA firm took 12 glass bottles, same manufacturer, so the weight and the price should roughly be the same. 12 glass bottles. They waited a month. They reviewed the redemption center's forms and receipt log, cash receipt log that they submit to the Department for Reimbursement.

And what they found, with respect to this redemption center, the CPAs or the analysts, they had taken the accountants, they had taken the 12 bottles on the very first visit, and they had received 61 cents for the 12 glass bottles.

When they looked at the logs that were submitted to the Department or to the program for reimbursement by Reynolds, Reynolds had added 32.8 pounds of cans and 12.8 pounds of plastic. So, instead of the $0.69, 69—sorry.

Instead of the $0.61 that the CPA firm accountant had received, the program reimbursed Reynolds $69.31, an additional $52.48 versus what was paid to the, to the consumer, to the customer. The second visit, same redemption center, Reynolds Recycling on University Avenue.

The analyst or the CPA person received $3.95 for 3 pounds of plastic bottles that they took to redeem and when we looked at the logs, the logs indicated that there had been a 6.9 pounds of cans that were added to the request or to the log seeking reimbursement from the program for an additional $11.04.

We went two times and we saw fraud those two times. Not sure if we were just lucky or whether there was more instances of fraud. We reported this immediately to the Department, as we're required to do by auditing standards evidence of what appears to be fraud.

And we were informed by the Department that they referred this to the Attorney General, but the Attorney General decided that it could not take any more action because it was only two instances.

We asked the Department about any action that they had taken with respect to Reynolds Recycling, any information they had requested, what happened to this specific employee, what kind of controls that they had put in place to prevent this kind of activities from happening in the future.

And we were told there was no further activity with respect to Reynolds Recycling by the Department. In 2020, we took a different tact. Instead of doing the same old thing, looking at a program that really had no structure, that really wasn't doing anything to ensure that the mandate was being met. Still self reporting, still honor system.

We looked at why. Why isn't the Department or the program doing anything? And what we found is we found that the Department—same findings—issues with the foundation of the structure of this program. Sorry, I skipped the slide, I think. But we found basically that the Department told us that it didn't have enough staff. Sorry.

So, anyway, this is from the report where the program or the Department represented that it was significantly understaffed, and that was the reason why it was not able to perform the functions and activities that it was responsible for doing. We noted that the person had been there for five years, through many audits.

The person that was the coordinator of this program, yet nothing was done. We also noted here on the very bottom that just because you don't have enough staff doesn't mean that you can forego your responsibilities to ensure the program is managed and run in a way that protects, protects state assets.

Protects so that you're accountable for the actions that you're supposed to be performing. And we noted at the very bottom here that the law specifically allows the program to use the money and the Fund to hire people to help to fund administrative, audit, and compliance activities, as well as to hire a third party to actually run the program until the program has enough staff to be able to do it themselves.

In this same report, we added recommendations. We included recommendations when they explained to us why it wasn't happening, why they weren't improving.

We included recommendations to hopefully have them address and fix what we thought were issues with the program. The first one, or number two, was to establish internal controls. Develop procedures and processes so the Department could ensure that, or provide reasonable insurance, that it was going to achieve its mission. In other words, that it would be reimbursing, it would be receiving the amounts that it was supposed to receive, and reimbursing redemption centers the amount that it was supposed to receive or were supposed to pay out.

We recommended that they identify or determine a process to select distributors and redemption centers, so they could audit their reports.

We recommended that they require distributors to develop and submit to the program for approval the distributor's internal control process. In other words, the distributor's process to ensure that they report and they submit to the program and the Fund the appropriate amount, instead of 5 or 6 cents per case, 6 cents per bottle or can of container, as they are supposed to do.

We offered additional recommendations. Program management should develop policies and procedures so that their staff will understand how they're supposed to do their job, how management expects those jobs to be, or those activities to be performed.

And that would also allow management to assess or evaluate staff performance. We recommended that management retain the services of a third party to help administer the program, again, until the program was able to do it themselves. We recommended or redemption centers to verify the weight of the material that the redemption center said that it had redeemed.

We recommended that the program reconcile those weights with the weight tickets that is generated when they send the recycled material to the recycler, when they ship it off to the recycler. In 2022, many of those recommendations or some of those recommendations were codified.

It codified procedures to require—to verify—accuracy and completeness of the data reported by the distributor and the redemption centers. The statute was effective upon approval which happened on April 27th, 2022. So, more specifically what the law requires.

It requires the Department to develop a risk-based process to select for periodic audit certain deposit beverage distributors and redemption center reports. So, we want the Department to audit those reports to ensure that there's some oversight over what is being submitted, not just an honor system, not based completely on self-reported information.

We again—or not we, the law—the Legislature had noted that the Department may hire personnel or consultants to perform the audit. More specifically the requirements of the law. It requires the Department or requires deposit beverage distributors to develop and submit internal controls, their internal control process.

A process that they have developed internally to ensure that the monies that they're supposed to pay to the program are paid. That second part, C2, obtain independent audit for the years ending in an odd number. Earlier this month, maybe end of last month, the Governor suspended that part of the statute.

So, currently, distributors are no longer—are not required—to submit their own independent audits for the last fiscally, for the last reporting your fiscal year or calendar year, however they maintain their books. I just want to, I guess, oh, in 2024, our most recent report, we found the Department had made no progress in implementing the recommendations that I showed you earlier.

Now the Department disagreed with our finding. We found that they had made no—that none of the recommendations had been implemented. The Department disagreed.

The Department felt that some had been partially implemented and maybe some fully implemented. We did not agree with the department's position with respect to how they viewed implementation status.

I mentioned, I think to Senator, that I didn't think it was meaningful or productive for us to go back and forth with the Department as to why we felt there had been no implementation of those recommendations, no progress on implementation. We will be back auditing this program about a year from now. That would be our cycle.

So, I feel like we will get a chance to assess what the Department has done a year from now to see how the Department has made progress, not only in implementing the recommendations but also in improving the program. We—I just add this.

Sorry—add this slide just because I wanted to make it to show the Committee that that is what the law says. It says that you can use the money in the Special Fund to fund administrative audit and compliance activities. I also wanted to include this slide. This is a slide that we had included in the report.

And it's talking about the other jurisdictions, at least at a very high glance, that we had looked at, other jurisdictions that had similar deposit beverage recycling programs. And the only two that we are aware of that it's run by the state is Hawaii and California. California has, I think, the number, I can't read that far away, but I think the number is like 127 staff that run their program.

Our program has much less staff. The other programs are run by private organizations. It could be the seller of the beverage or the distributor himself.

And I think some of those programs allow the distributor to keep or share in some of the money that is not—or some of the deposits—that are not redeemed. I just included this in case Committee was interested in looking at a different model to have this program going forward in the future. Anyway, that's all I have.

This is the link to where this report is for people that might be interested in reading the report, reading prior reports. If you have questions, I'm happy to answer the questions.

Okay, thank you very much.

Yeah, thank you.

Okay, next we have—do you have any questions of Les Condo? But I mean, we will have, we will have more questions probably later on after we hear from the Department of Health. Okay. Oh, of course. Okay. So, you have your own. Okay. Okay. So, while we move and set it up. Okay, thank you very much. Okay.

So, I didn't state my, I guess, opening statement beforehand as to the reason why I felt that there was a need for an informational briefing, but I had let both parties know why I felt that it's necessary to have this informational briefing, even though there were no recommendations and Mr. Condo did not feel like it was productive to go back and forth.

And that is that ever since I've been a Legislator, 10 years ago as a representative, there hasn't really been much progress in every single audit that I've seen for the past century.

And you folks may not have been around at the time, and I know Deputy Director Ho was not around at the time, so it doesn't really fall on you folks, but there hasn't really been much progress. And in fact, my understanding of this program is twofold.

One, it's supposed to cut down littering, and two, it's supposed to promote recycling. But since then, we actually have lost a glass recycler. So, we're going to have a lot of questions at the Department of Health moving forward, but we're going to let you folks first respond to the audit and we're going to have questions.

Okay, thank you. Move on.

Thank you, Chair, Senator San Buenaventura and Senator Fevella. My name is Kathleen Ho. I'm the Deputy Director for Environmental Health. The Department of Health has faced longstanding challenges in its implementation of the deposit beverage container program. I want to assure you that we are committed to addressing these challenges.

And I am actually engaged in the work the Department, the director's office meets twice a month with the program to try to get it back on track. We are committed to administering the program responsibly and achieving the statutory objectives and to increase recycling.

And with that, I'm going to turn it over to Lane Otsu, who is the Solid Waste Management Coordinator. Thank you.

Please proceed.

Okay. We've prepared a brief presentation to share with you all how we're addressing the Auditor's recommendations. So, just going to start off with our program objectives. There's three of them and the objectives are based on statute and the Legislature's goals as they were articulated in various Committee reports.

So, the first one is to increase program participation and recycling rates for deposit beverage containers and reduce litter. Strengthen the connection between manufacturing decisions and recycling program management to divert waste from landfills. And the third point would be improved transparency and accountability of the DBC program and address program deficiencies.

Next, we had prepared the same slide that Auditor has presented already. So, unless anybody has any follow up questions on it, I'm going to move on to the next slide. All right, so the rest of the presentations are our chance to share with you how we are addressing the State Auditors' recommendations.

So, for this section, I'm not going to read through all of them, but we have grouped the activities, but we have grouped the activities according to similar traits and have noted on the bottom of the page which recommendations these tasks address. So, we're working to implement the Auditor's recommendations.

We've gotten started on much of the actions and feel that we are making progress and are continuing to move forward. Following slides will show our progress in more detail. And I'm just going to address item number six because we didn't have anything to add in the following slides.

But I'll just say that in our response to the Auditor's report, we noted that we continue to administer the program with state staff. However, we just want to note too that we are also planning on retaining third party services to help administer certain functions.

So, for strengthening program objectives and procedures, consider that our accounting and inspection and enforcement manual, so two separate documents. Accounting and the Inspection Enforcement Manuals have been edited since our last meeting with the Auditor. And we're in the process now of sort of the last reviews so that we can declare it final.

And, and we'll continue to make updates to both manuals as we move forward in the future. I'll just note that—I'll just note that both of the documents, even when they were in their draft form, were being used for both employee orientation training and also as a reference, a reference document for existing staff.

So, yes, they were in draft mode at the time of the last audit, and we are working towards finalizing them. On the bottom are the notes where we list the recommendations that, you know, these active—activities—address. So, these are addressing recommendations 1, 2, 3, and 5.

Next slide, please. So, as far as audit and process improvement, we are working to implement the following audit and process controls. First, first one—first item is DoH-conducted, risk-based audits that are required by HRS 342G-121.5, subsection A. And this is, I think, the, the identical section that the auditor had noted.

So, we're finalizing, right now, an RFP to go out and enlist accounting, audit, and compliance services. And those audits will focus both on certified redemption centers and on beverage distributors. Additionally, we'll be implementing the audit requirement—oh, sorry, in addition to implementing the audit requirement.

We also plan to engage a contractor to provide expertise to improve our own financial control processes and procedures. Next item is the internal control process documents that the auditor mentioned in his comments. These are required of the beverage distributors, and it's pretty straightforward.

The document lays out the process or they have to fill out their process that ensures that their reports, be it monthly or semiannual, contain accurate data and that adequate records are maintained to qualify to review the reported data. The ICP documents were due on June 30 of this year. As of this date, we've received about 200 documents.

And so, there's 100 distributors who are outstanding with their submissions. And we are actually in—we've actually begun the enforcement process, and we are sending out letters currently. I also note that in previous years, we added a similar requirement to certified redemption centers.

In order for them to get certified, they have to have a fraud prevention plan as part of their—as part of their certification application. Next item, 342G, 121.5, subsection C, Item 2—requires distributors to turn in independent audits every other year. We were moving forward to implement this requirement for 2025.

However, we received feedback from several smaller distributors regarding the cost of the audits. Audits are expensive, expensive propositions, and for, I mean we can look at all of our semiannual distributors, and so, that's maxed out at 100,000 containers a year, meaning that in one year, they pay $6,000 into the fund at most, whereas a full audit can start anywhere from $15,000 to $20,000 dollars.

So, in light of this, the Governor issued an executive order to waive enforcement of the audit requirement for just this year's audit.

So 2025, until we can figure out a longer-term solution. As part of that executive order, distributors who competed their audits, some of who have, were able to, are able to turn it into us and we'll review those and potentially leave a waiver for the 2027 audit if it's adequate.

We're also working on a legislative proposal for the long-term fix, and in general, what we've done is identified three tiers of distributors, with the top tier being subject to the current every other year audit requirement. The middle tier being responsible for once every five-year audits. And then the bottom tier would be exempt from audits.

So, that's generally what we're gonna try to work towards next session. So, for electronic reporting system, we also can—we've established tracking—online tracking system—the foundations of which are built on database and mapping capabilities.

We also have the inspection module that has gone out for field testing, and they're going to wrap that up at the end of this month. Then we're also going to move forward with building out the electronic reporting system for distributors.

Because that would be like an online form that distributors can go in and fill in their, you know, their information, and so container counts and deposit fee payments would, that—those numbers—would flow directly into our accounting software, and that would help a lot towards you know, reducing hand entry, manual entry.

And then, we hope and we feel confident that it will increase the accuracy of the reports. Yeah. So, after we finish—we finish round out the distributor reporting component—we plan on working out the CRC reports so they can come in electronic.

So, why don't you tell us what that CRC is? Recycling centers?

Oh, I'm sorry. Certified recycling centers. Redemption centers.

Redemption centers.

Yes. Yes. Okay. So, so in this slide, we just wanted to share some information on our activities that are—that supplement—or sit side by side with the Auditor's recommendations, and that is another significant project that just kicked off is the analyzing our segregated rate and our handling fee rate.

So, the segregated rate is the conversion that we use when people go into the CRC—certified redemption centers—and choose to do redemption by weight, right before go to hand count, they said weight is okay. So, that number is pretty important because it has the ability or the potential to affect every single—every single redemption transaction.

So, yeah. So, both studies are going to examine the current rate and do fieldwork and gathering of economic data for handling fees and then let us know sort of what the new numbers are, and they'll make recommendations on whether it's suitable to introduce those new numbers. The handling fee study is required annually.

It evaluates whether the program needs to change the handling fee that is paid to redemption centers to process DBCs to an end product. Another thing that we'd like to mention is not DBC-related directly, but it will have an effect on the program.

And that is the reorganization of the solid and hazardous waste branch to create separate planning and enforcement sections. And this will have the net effect of increasing resources for planning and enforcement, but it also leave the office of Solid Waste Management with fewer responsibilities, so we can increase our time and effort on our recycling program.

So, you know, that the DVC program and we have other recycling programs that we also manage too. Then, finally, we just wanted to make a point that we're also working to make recycling more convenient by increasing the number of certified redemption centers. And the last slide is just we put all the projects onto a timeline so you can see, you can easily see, what projects are being worked on at any given time.

Thank you.

Thank you. Okay, anybody else you have?

No.

Okay, we got a bunch of questions.

Okay, why don't I bring up... who is also the...section chief.

Okay, terrific. I'll have Senator Fevella ask some questions first.

Why all these years, not so much the Department, maybe the Department of implement, computer or digitizing stations. So, the person that's in the can, and I want to be really quick on this one because every single redemption place has complaints, especially in my district. Reason why we hand count it because the weights can be varied.

You just seen that list right there. Very accurate. Persons that doing them saying they're paying out this much. Company maybe don't know. So, what they do is they take the money for themselves and that's what they've been doing a while.

How I know that is because maybe about 10 years ago, maybe a little bit more, my wife worked at one of the rentals. Her count was high, her numbers was accurate. Guy that comes in, she was wondering how this guy getting all these tips.

At the end of the day, she'd be the one giving them to the guy on the scale. At the end of the day, she get $25 in tips, but she doesn't see anybody tipping these guys. So, when she worked by herself, she doesn't get that amount of tips.

Maybe she wasn't working as good I guess, but she come to realize that he's playing with the numbers there. And you know, when she was just telling me about the 10 year and other things hasn't been changed in the program, people have been getting rich off of the taxpayers' money. So, I don't know.

And like I said that she said to you guys wasn't there, so I'm not blaming anybody. But again, how are we going to go forward, really go forward, in letting the taxpayers know that they're being protected because this is millions we're talking about.

Because I used to always think to myself, how does this redemption guy stay in business? Yeah, because they're playing with the numbers. They have to be. I'm not saying any names. They're not calling—I won't say what company my wife was working for, but they're playing with the numbers.

The workers playing with the numbers and the guys who redemption to the state playing with the numbers. So, if you have everything, I guess more computerized, I don't know if they can, which they can nowadays, have everything so that you know exactly what coming into that container and what exactly going out.

Because to me, this program has been a failure since it had been implemented, because back in the day, I mean, I know we all used to go to the store and take our bottle and get nickel or dime for the bottle.

I mean, I know it's difficult now because we want to try stop the waste going into the landfill, but we got to figure out something because, man alive, this kind of oversight, I mean, it takes to the audience that we see these kind of things visually, but imagine what the consumer thinking, right?

The guys was paying $6 a case for how many years did they pay on fine? What else they had? The companies that he made, Attorney General, somebody never like go because it was only two times. I mean, who's gonna pay for that? That's the thing. So, again, you guys said you guys never have enough staff.

And again, it's previous to you guys. So, going forward, since I've been here, I never ever heard that you guys needed more staff for this program.

Not one time came to the ledge to WAM saying, hey, you know, we need to either use more money or we need more money to increase our staff because we feel that this program is failing. Basically, that's it. So, to me, that's just.

So, to summarize.

Basically, how can we improve the program?

Yes. So, so, the question is, one, how much dedicated staff do you folks have right now to this program to DBC?

Just DB, none. Dedicated, just, just doing this program. None.

Okay, what about solid waste to do the recycling programs? I mean, how many, how many staffers do you have then that's not dedicated, that at least does something with the program?

Office of Solid Waste Management in total...we have about 15 people in total.

Okay. And they do all of these other stuff?

Yes, so 342G does have a whole list of responsibilities under the offices...management. So, we do have the statewide recycling programs like the DBC program, the ADF, the electronic waste programs. We also have the solid waste planning activities and associated enforcement actions. So, as Lane had mentioned during his presentation, we are in the middle of a reorganization.

We already went through.

I understand. So, this is moving forward.

Yeah, moving forward, we are looking to do that. So, the planning activities will be to a dedicated section so that OSWM can really focus on the existing recycling programs. It won't speak specifically to DBC, but it would just be for all statewide recycling programs.

So, it would be providing more resources to the program moving forward.

And where do you expect to get the money to get to—do you need more staff? I mean, because.

Yes, we do.

Okay. Why can't you use the special dedicated fund, which has been going to get that staff, without having to ask us?

Under OSWM currently, we do have five vacancies. Four is under recruitment and one we're in the process of recruiting. Aside from that, most of the reorg is completed. The problem is that we do have some unestablished positions that can be filled and, but however, until the reorg is completed, we can't establish them and fill them.

So, why is it taking—I mean, what Senator Fevella is sharing my first vision. As consumers, we're paying $0.06 per can and we've been hearing, I mean, like I told earlier—I mean I've only been the Legislator for 10 years—this program has been going on for more than 10 years and it's always been self-reported data.

Why did it take so long to actually determine that there's a need for reorganization and to have, instead of relying on self-reported data, having—doing—an RFP for getting the content?

There's always been a need to reorg. There always has been. But as Lynae pointed out, there are 12 people—how many people? You know, so in order to start the reorg...

You need to hire more people.

So, Lynae has to begin the reorg, in addition to all of her other duties.

And then, so that's how it's, you know, so while we, while there's a need and we recognize, or it was even before my time, but I was her lawyer. So, there was a recognition that there was a need to reorganize. But Lynae didn't have the bandwidth to run permitting for landfills to, you know, all the things that she does in addition to overseeing this program, in addition to trying to reorg.

So, we were able to hire someone recently who has been able to assist us in reorg-ing, helping us with reordering various branches within our administration.

And so that's why we were able to get this reorg done.

Okay. As Les Condo has pointed out, in two years, they're going to audit anyway and they're going to find out whether or not you have any progress. It sounds like—and I think we have Garrett Moreno here, right, and I know you're chomping at the bit, and we'll get to you. Okay, regarding the handling fee.

I'm going to ask about that, whether or not that's going to be enough to pay for your audits as a distributor. But basically, as a consumer, we're paying this six cents that we don't know whether or not we're going to get that, and as Les Condo pointed out, redemption rates have gone down.

We don't have enough redemption centers. We're not seeing the driver incentives that we've seen in the, I mean, we go to the mainland, right. We see what is happening over there that people are able to, at the stores, be able to redeem their stuff there.

And we see a slush fund that has grown where we could use that money to increase these redemption centers and also to incentivize the recycling to remove the purposes. Right? To remove more—to remove waste from the landfill and hopefully have the—and we don't see that being implemented here in Hawaii when we see a slush fund increasing.

So, you make mention of the other states. So, there's 10 states with bottle bills. Seven of them, including us, are seeing reducing redemption rates. I take that back. Yeah....one of them, however, believe it was Connecticut, they just recently increased their deposit from $0.05 to $0.10 and they saw a spike.

But in talking with them, we understand that they are having issues with interstate transport of materials, so that number could be artificially high. But, you know, we do recognize that other states are having trouble as well. And so, we are evaluating what is happening in the state. So, we, we've seen in the last five years a decrease.

Okay, I'm sorry, I'm sorry, I, I hear you that maybe increasing the...

I'm not suggesting that because I think there's other areas that we want to look at first. That would be good. But I'm just saying of the two, the three, of the three states that RC increases, two do have $0.10 redemption—I mean, deposits. But as I said with Connecticut's, we're not sure how inflated that number is.

But just the point I was trying to make is the other seven is also seeing decreases as well, but not to say that it's the value of the deposit, that's the cause because it's no longer the incentive, but to address Senator Fevella's question also, is that we are going to be—we are putting out an RFP.

We actually have an RFP out now, under the EMD program, for a master contract that allows for us to utilize for auditing, but we are doing our own RFP for auditing services. We hope to have that out soon. So, that would help with addressing one of the Auditor's concerns and the issue of evaluating the, the activities at the redemption centers. So, that's one of the activities that we'll be addressing.

Yeah. And it sounds like from the Auditor's testimony, even though, because they got a lot of agencies they have to audit, you know, when they did, when they finally do a sporadic audit of the DVC and they do find fraud and waste, the Attorney General doesn't do anything about it.

And I know we don't have an AG here for that for us too, but it seems to me that should be at least a red flag that this per—this retailer—collects 6 cents a can but only pays out 6 cents per carton to the state. So, it sounds like to me that that's theft. That is prosecutorial.

That's theft. I mean, why wasn't that referred to the office of the Prosecuting Attorney? I don't know. Okay, that was before both of our times. All of our times. But second. So, it's not just—it's not just a civil liability, it's also a criminal liability that wasn't followed up on.

But it should at least be a red flag to the DVC that this particular retailer, distributor, needs to be watched more carefully, and for them, maybe their handling fee should be higher because you guys are gonna need to deal with them more. And second thing is.

Well, it sounds promising that you guys are gonna RF finally, after how many, over a decade now, this program gonna have an internal audit. I, I'm hoping RFP-ing out an accountant so that they can audit out both the distributors and the redemption centers.

But seems to me the redemption centers is the more fluid one rather than the retailers, because with the retailers, you see on the receipts, you know, it's already digitized the six senses being charged for every single person. So, it's, to me, it's an easier audit because it's digitized more, and maybe we can.

And we'll go talk to Moreno about that. Maybe because of their internal controls, we can loosen up on them a little bit, unless, until a red flag shows that they should be watched. Yeah?

One other thing, we're going to be asking for an increase in our ceiling so that we are able to do more contracting to assist us in the program.

So, you want an increase in the ceiling of, for the use of the...because there is this fund that is growing because the redemption rates are lower?

Yes.

Okay. Other than looking for increasing certified redemption centers, have you thought about what, what's going on in the mainland where it allows for those vending machine type redemption to make it, to make it easier for the consumer?

Because it's a lot easier for the consumer to see if I'm paying six cents, you know, at a time that at least I can bring back, get 5 cents back at the time when I, when I go to long strokes when I buy all of this cans of soda.

So, is that, is that going to be you guy's recommendation? Because you know, we have a lot of stores or whatever areas, especially they have soda machines outside of Walmart. You know, if they can put these kinds of vending machines out there, I don't see why it wouldn't be a recommendation.

Maybe you guys give them, I don't know, I'm not gonna say break on anything, but give them more of an incentive to have these machines or these resentments because they were going to increase. Right now, a lot of people don't go because we lost one in...beach. We only have 1. Actually 2. We only have one.

And when you go there, because it's a shopping center school and a post office and a mechanic shop, you're dealing with traffic. So, of course, nobody let go over there. You know, it's not the most.

And then Arizona always getting robbed every so often because the place where they have them is in the back of the shopping center and it's very dangerous and they get hit. So, the people working there also is in danger of being robbed from whoever's robbing the area. So those are the things—I think it would be more open. I know it's hard because these containers are huge.

But if you work with the guys like Reynolds or whoever is the highest to maybe purchase these vending machines, they will come in and service them or whatever like Coca Cola, Pepsi Cola, you know, these companies then maybe would have a little bit more security, I guess you can say, in the redemption of these models.

Because I like it when they used to bring the mobile one and they park up there and everybody goes over there and put them in because then you see what you're getting, you know. So, I think that's something to be to consider, but I really would like that idea too, going forward.

Yeah. And I just wanted to add, in addition to all their other duties, these—office of Solid Waste Management has to assist in trying to find spots for people to redeem their bottles and cans.

And we feel that. But we're also looking at $70 million special fund that you could have tapped into. Do you have any questions? Okay. I want to allow Garrett Moreno, who came all the way here from Maui, to go talk to us about why there was a need for this executive order. Okay. Come on.

Come on up. And then, okay, why don't you identify yourself and.

Sure. Thank you, Senators for giving me an opportunity to speak. Fortunately, it's not too far from Maui, but I'm happy to be here. My name is Garrett Marrero. I'm the CEO and co-founder of Maui Brewing. We operate four restaurants and one production brewery, beverage manufacturing. We exclusively package in aluminum cans.

All of those cans are made over in Kapolei. They all have the high five embossed right in them, so there's no issues with labeling. I think I bring a unique perspective because we have, like I said, the four restaurants, as well as the brewery.

So, I'm seeing it from the retail as well as the wholesale and distributor side. And I want to start out really by saying I'm not here to be abrasive, critical, or otherwise. I'm here in service of our state. I'm just here to help offer opinion and hopefully find solutions together, because I agree with you, the program does not work.

To give you an anecdotal example, we've been in business a little over 20 years and all of my conversations with Department of Health around the deposit beverage program over those 20 years have happened in the last three months.

I think that's where my side of the story kind of started was, whoa, I'm going to get hit with an audit for 15 to 20k per location. And our smallest location only pays about $48 in fees a year. So, now, I'm spending 15 grand every two years to get this audit.

That even if I was 100% or 1,000% wrong, we might find another 50 to $500. Right? And it dawned on me that I think this was just an unintended consequence of the legislation, not an intentional hurting of small business of course. I think the internal controls with each business are obviously going to vary, but they're pretty basic.

It's how many beverages out and then how many beverages in if you receive. So, for us, I look at it like this Whole Foods example. I think this is an issue of lack of education and guidance from the Department, as opposed to actual criminal fraud.

I mean, a publicly traded company like Whole Foods, I would find very difficult to believe that they're engaged in some method to defraud the State of Hawaii. However, the reporting system could have been wrong on their side. And it's a simple check, like for the education. Someone call the Department of Health, say, hey, we're seeing this.

How come this is different? Oh, it's supposed to be 6 cents a can, not a case. And it looked like both of these incidents were probably post-Covid with the labor issues that we all have.

Whereas from Mr. Condo's statements, it sounded like the redemption centers were actually the problem you, yourself, Senator Fevella, that that's where there's this fraud occurring. So, I see it more on redemption center side than I do see it on the manufacturing and wholesale side and retailers, of course, as well.

To address the vending machines, I almost see that as, because I see them in the mainland as well, and I rarely see them working. I think it's the—it might be the next wave of EV chargers. You know, we hard to find a working EV charger most of the time. So, I think this also presents some challenges.

Not that it couldn't be done. I think the—sorry, I left my glasses back at home and I'm getting older. I agree with the digital system for all of us. I do the reporting myself.

I took on that reporting because I found that we were over reporting, only by a little bit, but we were reporting for glass bottles. And when I inquired as to why we were reporting our glass bottles, I found that they couldn't get a straight answer from the Department on what bottles need to be.

To deposit beverage program.

So, we were over reporting 10, 20, $100 a month, something like that, not, not a ton. So, I took it over and I realized that how easy the process is, but how archaic it is as well. It's paper through the mail; it could be digitized.

And I hope as we're working towards digitizing, we're using the standard government system for that. We report high tax, GET, all of these other things. Not a new login, not a whole new security function. It should be very simple. So, that is definitely a method that will help on our side.

Again, the crux of me being here is because the small businesses were going to, again, unintentionally be subjected to enormous costs with no benefit to the state.

And it seems to me when Mr. Condo said that, you know, there were, there were certain things had been attempted and conversations around these audits, the program basically just said, oh, well, we'll comply. We'll just require everybody to get their own audit.

To which then I realized, if they're not looking at the forms today, who's going to look at these hundreds of audits and then determine whether or not something's wrong in the first place? I could also not get a straight answer as to what we were actually auditing.

So, during the quotation process for these audits, we asked, what are the control points that we need to be auditing with our third-party auditors? Never could get something specific. What format would you like this audit in? Right? And that's going to be critical, right?

Anybody, any Department that's reading these audits, do you want to read 300 different audits or do you want a standardized format? It would make sense to me that it'd be standardized. We could not get that.

So, lastly, because of the haste that this program was rolled out in, in 2024, failed audit, knowing that 2025 is coming around and audit's going to be in a year, all of a sudden, in 2025, we started getting a lot of communication from the Department about this third-party audit.

And it makes sense to me because of the failure of the previous audits, that now this was going to become an issue. So, it's almost like, you know, you know, dad's coming home, you better clean your room, right? And I think that that's what I felt like.

And so it was, first we got a letter saying it was September 2026, which was then later corrected to September 2025. I think that left us a little under 90 days to be able to comply.

No Auditor in the state could get these audits done in time for the September 30th deadline and any ones that we talk to. And again, we have five locations that we have to do this for. So, it felt like a rush.

It felt not fully fleshed out and frankly, $65,000 for us to spend in audits at a minimum for very little benefit, if any, I can certainly tell you there'd be no benefit because I do the auditing and I have a very simple process that—the Department does have my internal control document.

It's how many cans do we make and how many cans do we sell? How many shifts we got out of state. Real simple, two reports, and I've got all that data.

So, giving you context as well, $65,000 in audit fees at a base against a total of about 8,000, maybe $9,000 in fees that we pay a year into the deposit beverage program. So, again, using my earlier example, our smallest store, Kailua pays about $48. The restaurants are all sub 300. The production breweries about 8,000, maybe 7,500.

Unfortunately declining right now as we see tourism declining in the state. I think—let me see here, sorry. I think the increase of a deposit—I did some research on bottle bills and while there are 10, there used to be more. Several have abandoned having deposit programs because they found these same issues.

They didn't work and it was a constant hole. Seemed to chase a solution but create the problems. So, I think I would caution that we just don't go running at it without stepping back and looking from a 30,000 foot view first. Is there new technology to be able to sort our trash potentially?

Is there a better use for glass bottles rather than recycling them and sending them to the mainland or some foreign country that's taking our glass? Could we instead crush and use as concrete amendments to increase drainage in soil?

Are there other things that we can do to insulate our state and create more independence rather than create more carbon footprint by aggregating bottles to then ship somewhere? I think increasing the deposit is an incentive to increase the fraud. So, I think we need to address the fraud before we look at increasing the benefit to fraudsters.

Let's see here. Really, we gotta start carrying those glasses, I tell you. Let's see here. So, I think that's—those are the basics. Again, I think I'm here today just as a small business owner and it's discouraging that most business owners are not as involved in the legislative process as I am.

I have found in 20 years that I probably wouldn't be here had I not fought for our industry that is brewing primarily but also restaurants, because it seems that every day there is a new...

I think I expressed this in my numerous emails to all of you that it feels like every day there's a new challenge to wake up to and I feel I have to bolt on a suit of armor every day to leave the house and just try to make a small business here in Hawaii work, while we see new programs, new ideas, new filing requirements that cost, cost, cost us and then now our consumers which drive numbers down.

And so, the—I feel like I long ago lost the quiet enjoyment of my business to just be, just let me be successful, let me help the community, let me pay more in taxes because we're successful.

All of these things. Programs like this and especially this third-party audit requirement only compound the issues that we have as small businesses. I have the fortunate situation where my team is such a great team that they allow me and afford me the ability to be here on behalf of our team.

I have the unfortunate position of other small businesses know that I'm going to fight anyways so they don't always join up with me. They're behind me but they're not physically here and I think that's a challenge and I think that really speaks to what we have to do as a small business to survive here.

Again, I'm not here to be critical. I'm here to just point out our point of view from our situations. And I really, I hope the Department takes my testimony here, my comments and uses them to craft a better program. And please, I'm offering more of myself than I probably can give, time wise.

But I, I really hope to be part of a solution. I never intended to be part of a problem, but I think you can tell very simply. I think my Kailua store just illustrates the example best. $48 in fees for anybody who wants to buy a Crowler or a beer to go and $15,000 audit that no one's going to read.

So, I think I'll close there. I'm happy to answer any questions and if I have more thoughts as we go through that, I'll be happy to...

Thank you. Won't you hold on. Any questions of Mr. Moran? No, I, I do. You heard from Department of Health that they provide handling fees. Are you saying that you don't have enough handling fees or do you get, you get to keep a portion of the $0.06 per can or bottle?

Sure. So, I'm not—yeah, I'm not a redemption center, so, I don't keep any handling fees.

You don't get any at all?

Yeah, so we just, we charge 6 cents, we pay 6 cents. We're not keeping a penny.

So, the audit is solely on your back?

100% on our back. And the Department does have audit capability. I mean, I think auditing bad actors, you know, audit bad actor every year. If you nailed redemption center, you know, some ideas on that. They got nailed for, you know, this two visits that were fraudulent, should be getting it audited every year. Right?

But good actors, you know, spot audits do work. And I think there was a comment that were conducted audits, but on the same line, it said that they were getting on RFP to conduct audits. So, I'm curious if there actually were any audits done because they have the capability to do the audits. I think we should start with education over enforcement, I think we should start with education over enforcement.

This has always been something I've preached with liquor control as well, which is, if there's another meeting for that, please let me know. But—I know, I'm teasing. The, you know, I think from that perspective, like the audit requirements on a third party, do, do the spot audits.

I mean, that's fine. If we get hit with a spot audit and the state's paying for that because they have the funds to do it. I think maybe AG didn't look at it because you got a fund climbing to north of $87 million every year it goes up while those rates of redemption go down.

So, like, well, what's the big deal? We got an extra 12 million bucks since last year. So, is it worth their time to chase that bit? Right. So, you have this snowball of a problem.

But again, for businesses like ours that simply sell beverages, we do not keep the handling fee that is, I think, exclusive to the redemption centers.

Okay, thank you very much. Any other questions? Okay. I have a question of Les Condo.

Thank you. Appreciate you.

Thank you. And so—and I know you may not have been prepared for this question, but it begs the point of are there any other states you know of that require the distributor retailer to provide their own audits?

I don't know.

Okay. I didn't think you would. Okay. But it something that—we did saddle this program to Department of Health, which is probably not its...unlike Department of Taxation, which has the power of auditors. We were hoping that they would use the.

Is it your recommendation that because we have the Special Fund that they be able to use such funds to conduct these audits instead of you folks having to do it? I mean, you still have to do it. You still have to audit them, to audit their accounting abilities.

But right now, you're saying that you're doing more, you're doing management stuff.

Well, we're not doing it anymore. I mean, honestly, it's not good use of my office's resource to audit this program every other year, because right now, there's really no program. I think once the program has the things that they were describing in place, maybe.

But I do think there's a lot of information that may not be correct right now, and I think the Department can help on some of this. But education, you know, like the gentleman said, that's very important, I think.

But I do think the comment about risk-based assessment—I don't know if that was the Department or somebody else—that's in the statute. That's what we would suggest very strongly that there be an assessment process to determine where to look.

You know, it's not, maybe it's not the small Kailua store that has, you know, $64 in deposit fees. That's not where the risk is most likely. It's not in those small distributors. So, that's probably something that the Department may want to consider. I heard that they had gotten 200 internal control processes from distributors.

I think it's very challenging to look at 200 plus the other hundred that's outstanding. They need to develop a process to determine which ones to look at. And I would suggest that's data driven, risk-based assessment or determination. So, I think that's—I would hope that that's still in process.

I don't know what the Department is doing in that regard, but that would help them identify and select what reports they're going to look at, what they're going to focus on, perhaps what they're going to audit.

Perhaps then maybe modify the statute to address the concerns that Maui Brewing expressed in terms of which organizations and maybe more specifically what kind of audit the internal controls are. I think those are very important. You know, I hear Mr. Moreno—Marrero—describing that he's the internal control.

He knows how many bottles and cans that they produce and he reports it. I would suggest that's not a sufficient control process. It's like one person signing a check. I mean, he may be great and he may be totally honest, but I want a process where I have some assurance that that count is correct.

So, even for a small organization, perhaps that's not correct. But that all said, that's not where maybe Department wants to spend its energy.

Anyway, I think there's a lot of maybe confusion to some degree about the program, because I hear some questions, I hear some comments that seem like you were suggesting that the distributor is keeping some of the handling fee. Like Mr. Marrero said. Excuse me.

Mr. Marrero said. He's correct, that that money is going to the recycler or the redemption center. That handling fee, the $0.01, he's just collecting it and putting in the funds.

Okay.

Anyway.

Okay. A lot of food for thought. Yeah, sure.

Thank you very much.

Any other questions? Okay, you folks—Ms. Ho. Deputy Director Ho. Do you want, do you want to have any closing statement? Otherwise, we heard what your proposals are. It sounds promising.

As Mr. Condo stated, they're going to audit you anyway in two years, which is because they're required by statute, and we will find out at that time whether or not your goals are being met.

But you do have a sizable special fund, which, because it's a special fund, we don't touch it either, unless that you have access to. So, use it. Yeah. Come on now.

Linnae's gonna talk about our special fund. She's been here for that.

Yeah. Why don't you do that?

So, we maintain a sizable large balance in the Fund, about 58, 59 million a year, just so that we can enter into contracts and issue PO's to the redemption centers as we have to pay them, reimburse them for the nickels, and pay them the handling fees.

So, in order for us to pay them, we have to enter contracts with them. And then, for the other expenditures that we're anticipating, like going into contracts, we have the segregated rates and handling fee studies coming up. We're going RFP for auditing services. So, we're estimating that for FY '26, that we're looking at about a 64 million estimate.

But depending on our segregated rate and handling fee study—the segregated rate preliminary data will be coming in in March of next year that could really affect what our...yeah. As far as how we, how we pay out, because the, the weight—the conversion rate from units to weight may be affected.

So, that's part of the reason why we're asking for a ceiling increase for FY '27, because with that uncertainty at this point, we're not getting the data until early next year. We need to be prepared for FY '27. So, there is a need to have a sizable balance in there just so that we can encumber contracts and PO's.

It grows every year, though.

Yes, I recognize that, and...

And redemption rates are going down.

It's because it's going down. Yes, yes. I, I understand.

And the two states that have an increased redemption increase their—yeah, increase in deposits. And we—and I can't see us justifying an increase in deposits with the, with the audit.

And we're not, we're not ask, and we're not asking for that.

So, we need a plan other than increasing—other than referring to the states with an increased redemption rate.

I guess the point of...

Decrease redemption.

Yes, I agree. That's not the plan that I would suggest either. I think what I was trying to, when referencing the other states, is the other states are also struggling with redemption rates. And so, but as far as the special fund goes, yeah.

And I understand. It just rings hollow that you don't have enough staff when you have this sizable Special Fund. And it does ring hollow there's no third party audit and relying upon distributors for, I mean who've been really good with it when we have the sizable Special Fund that keeps growing. Right, so.

So, we're hopeful that the reorg can go through. We did get—go through—the union approvals. We went through BNF once. You know, we're addressing their comments. We're ready to resubmit. So, we're—hopefully we'll move forward on that so that we can create the positions that we need and fund it because it's a cost neutral reorganization.

We want to start with that and start with that and see how it goes with that.

I think we'll give—I will give you leeway until the next audit. But after the next audit, we're going to have to start looking at whether or not—this is two decades. 2004. Two decades. And yeah, I think the Legislator needs to seriously look at whether or not there's better recycling programs.

And yeah, that is far more efficient than what, than doing what we're—what we've been doing for the past two decades. Any other questions?

So, even like for right now, okay, you guys named a few problems. Whatever the AG didn't do.

So, why, like as from Maui Bruce was saying that, why don't those guys be charged to do their own audit instead of doing it blanket wise and making the consumer what he was saying penalized for a few guys who's not reporting correctly?

Because to me, I never was a big supporter of this program because before the program came in we were sticking our cans in anyway. We never have the $0.05 fee. We still was taking aluminum, take our copper, our brass, whatever was recycling. But they put this program in was supposed to benefit, right, the state, which it's not.

It's really not. So, we, we, we bring in, you guys pay out how much a year, you said, with all of handling fees and to the distributors.

Well, I don't have that specific breakdown, but last year, we spent over 54 million.

And how much we bring in?

Last year, our revenue was about 60 million.

So, we bring in 10 million more than what we pay out.

Last year, but we anticipate a, a higher payout. This—not because of the additional expenditures with contracts. We expect the expenditures to be more.

We're the only state that don't recycle everything. Right? We only do ones and twos. Right?

Every container that we collect under the.

But that's—you cannot recycle the cap. So, when you go with the cap, you got to take them off. Because when they go curbside, the city picks up curbside, and those caps are on. They charge the city. So, now the city pays for that. Who you think pays? Taxpayer.

So, I'm saying that we don't have a program actually really working besides the aluminum. And we lost—she said we lost a bottle distributor.

We don't have the glasses.

We've been talking about this for years, even when I was with the city as a refuse inspector. Why are we not taking the glass, putting it into construction material? They did it in Maui for a road. Somebody sued the city or the county and saying that the glass is cutting their tires, so they stopped doing the program.

Then they're gonna go plaster the landfill area with all the glass and somebody would grumble about that. So, that's what I'm saying. So, how is this program gonna actually work?

And as we need more innovation, and not putting everything upon you guys, but it's not working because again, a consumer paying for something that again, they was already doing. We was already recycling aluminum before the 5—$0.06 fee—was already doing bottles. I don't know how much you guys remember Primo beer.

You know, back in the day, we used to collect them and turn in the bottles to the distributor, and we get some money back. You know, I know bulk company is the one that makes all you guys' cans. So, those are the things that we got to look at this program. And I know you guys not.

But I know, Senator, I feel the same way. If you guys are going to talk about tens, I would never support any more increase unless we can get a hold of what we have now. If we cannot get a hold of now, this program fails. We shouldn't even have the program because the consumer is paying.

Not everybody recycle. If you go look at the blue cans, not everybody recycle because it's not work for them to put it in a bag, store it all. And then you gotta wait to go over there. Oh, the light too long, bring them back. They rather just straight away.

That's the reason why you guys might be going down in receiving, because the accessibility and going and the convenience of going is not like before. It's not happening. It's not as something that they want to go and do it and get a few dollars back.

You know, I mean, don't get me wrong, our homeless population loves the program because they get to collect money and recycle, but it's not working for the whole consumer. That's the problem I have.

Thank you. Yeah, thank you so much. Thank you, folks, for coming, enlightening the Legislature and hopefully the public who's been watching what is going on. And we hope that your goals do succeed and we do have a better audit in a year and a half. Appreciate it. And with that, we are adjourned.