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DennisJ.GallagherAuditor

OfficeoftheAuditorAuditServicesDivision

CityandCountyofDenver

DenverArapahoeDisposalSitePerformanceAudit

October2014

The Auditor of the City and County of Denver is independently elected by the citizens of Denver. He is responsible for examining and evaluating the operations of City agencies for the purpose of ensuring the proper and efficient use of City resources and providing other audit services and information to City Council, the Mayor and the public to improve all aspects of Denvers government. He also chairs the Citys Audit Committee.

The Audit Committee is chaired by the Auditor and consists of seven members. The Audit Committee assists the Auditor in his oversight responsibilities of the integrity of the Citys finances and operations, including the integrity of the Citys financial statements. The Audit Committee is structured in a manner that ensures the independent oversight of City operations, thereby enhancing citizen confidence and avoiding any appearance of a conflict of interest.

AuditCommittee

Dennis Gallagher, Chair Robert Bishop Maurice Goodgaine Jeffrey Hart Leslie Mitchell Timothy OBrien, Vice-Chair Rudolfo Payan

AuditStaff

John Carlson, Deputy Director, JD, MBA, CIA, CRMA, CGAP Chris Wedor, Internal Audit Supervisor, MBA Katja Freeman, Lead Internal Auditor, MA, MELP Manijeh Taherynia, Senior Internal Auditor, CPA, CFE, CRMA Torry J. van Slyke, Senior Internal Auditor

Youcanobtaincopiesofthisreportbycontactingusat:

OfficeoftheAuditor201WestColfaxAvenue,Department705DenverCO,80202

(720)9135000Fax(720)9135247

Ordownloadandviewanelectroniccopybyvisitingourwebsiteat:www.denvergov.org/auditorA2014006

To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services that provide objective and useful information to improve decision making by management and the people.

We will monitor and report on recommendations and progress towards their implementation.

City and County of Denver 201 West Colfax Avenue, Department 705 Denver, Colorado 80202 720-913-5000 FAX 720-913-5247 www.denvergov.org/auditor

Dennis J. Gallagher Auditor

October16,2014Lars Williams, Director of Solid Waste Public Works Solid Waste Management City and County of Denver Dear Mr. Williams: Attached is our performance audit of the Denver Arapahoe Disposal Site. The purpose of the audit was to assess the efficiency and accuracy of the invoice reconciliation performed by the Department of Public Works (PW) for the services it receives from Waste Management of Colorado (WMC), specifically for the Solid Waste Management Divisions (SWMDs) dumping of non-hazardous solid waste at the Denver Arapahoe Disposal Site (DADS) and other WMC-owned Denver-area transfer stations. The proper management of a large urban landfill and disposal facility is an important task for our City. Our review and conclusions are designed to give SWMD additional insights to this activity. While the generation of waste may increase proportionally with income, the economic and environmental costs associated with landfills continue to rise. Ideally, waste reduction at the source, through policy initiatives, may promote the most effective and efficient way of handling disposal issues in the future as our City expands. Waste prevention should be our next target. My team found that, although SWMD management believes that the Citys DADS disposal rates are fair, SWMD management does not actively investigate whether the DADS rates proposed by WMC each year are indeed lowest, best, consistent, or competitive, as specified in the contract. We also found that, although the DADS disposal rates that PW pays appear to be consistent and competitive with what other Denver metro-area municipalities pay at their respective landfills, PW has not received the lowest or best disposal rates at DADS. It is my sincere hope that you look into this matter and reconcile any gaps my team has identified in order to ensure that the City is receiving the lowest and best disposal rates at the DADS landfill. If you have any questions, please call Kip Memmott, Director of Audit Services, at 720-913-5000. Sincerely,

Dennis J. Gallagher Auditor

To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services that provide objective and useful information to improve decision making by management and the people.

We will monitor and report on recommendations and progress towards their implementation.

cc: Honorable Michael Hancock, Mayor

Honorable Members of City Council Members of Audit Committee Ms. Cary Kennedy, Deputy Mayor, Chief Financial Officer Ms. Janice Sinden, Chief of Staff Mr. David P. Edinger, Chief Performance Officer Ms. Beth Machann, Controller Mr. Scott Martinez, City Attorney Ms. Janna Young, City Council Executive Staff Director Mr. L. Michael Henry, Staff Director, Board of Ethics

To promote open, accountable, efficient and effective government by performing impartial reviews and other audit services that provide objective and useful information to improve decision making by management and the people.

We will monitor and report on recommendations and progress towards their implementation.

City and County of Denver 201 West Colfax Avenue, Department 705 Denver, Colorado 80202 720-913-5000 FAX 720-913-5247 www.denvergov.org/auditor

Dennis J. Gallagher Auditor

AUDITORS REPORT

We have completed an audit of the Denver Arapahoe Disposal Site. The purpose of the audit was to assess the efficiency and accuracy of the invoice reconciliation performed by the Department of Public Works (PW) for the services it receives from Waste Management of Colorado (WMC), specifically for the Solid Waste Management Divisions (SWMDs) dumping of non-hazardous solid waste at the Denver Arapahoe Disposal Site (DADS) and other WMC-owned Denver-area transfer stations. The audit also assessed PWs role in the process to negotiate and determine solid waste disposal fees for dumping City-hauled waste at DADS. While DADS and the three solid waste transfer stations SWMD uses to dump solid waste were included in evaluating SWMDs invoice reconciliation, the assessment of disposal rates was limited to DADS, since this is the only facility where SWMD has the ability to negotiate disposal rates.

This performance audit is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, General Powers and Duties of Auditor, and was conducted in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Our audit work found that, although SWMD management believes the Citys DADS disposal rates are fair, SWMD management does not actively investigate whether the DADS rates proposed by WMC each year are indeed lowest, best, consistent, or competitive. We also found that, although the DADS disposal rates PW pays appear to be consistent and competitive with what other metro-area municipalities pay at their respective landfills, PW has not received the lowest or best disposal rates at DADS.

We extend our appreciation to Lars Williams and Mike Lutz and the personnel who assisted and cooperated with us during the audit.

AuditServicesDivision

KipMemmott,MA,CGAP,CRMA DirectorofAuditServices

Foracompletecopyofthisreport,visitwww.denvergov.org/auditorOrContacttheAuditorsOfficeat720.913.5000

BackgroundTheSolidWasteManagementDivision(SWMD)oftheDepartmentofPublicWorks(PW)operatestheCitystrashcollectionprogram,whichservesDenverssinglefamilyhomes,residentialcomplexeswithsevenunitsorfewer,andmostmunicipalfacilities.ContractualagreementsandanExecutiveOrderrequireallnonhazardoussolidwastehauledinCityvehiclestobedirectedtotheDenverArapahoeDisposalSite(DADS).AlthoughtheCityownsDADS,WasteManagementofColorado(WMC)hasassumedexclusivelongtermoperationalresponsibilitiesandenvironmentalliabilitiesforthesite.WMCpaysapercentageofitsDADSannualrevenuestotheCityasroyalties,whichareamainsourceoffundingfortheDepartmentofEnvironmentalHealth(DEH).

PurposeThisauditsoughttodeterminewhetherPWensuresthatWMCchargestheCitythelowest,bestdisposalratesfortheCity'suseofDADS,andwhetherSWMDscurrentreconciliationprocessensuresefficientandaccuratepaymenttoWMC.

City and County of Denver Office of the Auditor Audit Services Division

REPORT HIGHLIGHTS

DenverArapahoeDisposalSiteOctober2014TheauditassessedcontractcomplianceofthedisposalratesthattheDepartmentofPublicWorks(PW)receivesattheDenverArapahoeDisposalSite(DADS)andexaminedPWsinvoicereconciliationprocessfortheservicesit

HighlightsContractualagreementsbetweentheCityandWasteManagementofColorado(WMC)statethattheCityshallreceivethelowestandbestpertondisposalratefornonhazardoussolidwasteattheDenverArapahoeDisposalSite(DADS).Inaddition,thesecontractsstipulatethattheDADSdisposalratesWMCchargestheCityaretobeconsistentandcompetitivewithdisposalratesatotherDenverMetropolitanarealandfills.ManagementwithintheDepartmentofPublicWorks(PW)SolidWasteManagementDivision(SWMD)believestheCitysDADSdisposalratesarefair.However,auditworkrevealedthatPWhasnotreceivedthelowestorbestdisposalratesatDADSandthatSWMDmanagementdoesnotactivelyinvestigatewhetheritsDADSdeposalratesareindeedlowest,best,consistent,orcompetitive.