Bill
GM 1259
Hawaii requires independent audits for larger beverage distributors and exempts small ones, with risk-based DOH oversight and stricter internal controls.
The bill amends Hawaii’s deposit beverage container program requirements to modify when and how independent audits are required for deposit beverage distributors. It aims to reduce the financial burden on small businesses while preserving accountability for accurate reporting and fee collections.
Key rationale:
- The existing independent audit requirement, which applies to certain distributors, has imposed financial hardship on small businesses.
- Prior recommendations and the enactment of Act 12, SLH 2022, already required audits for some odd-numbered years, but the new measure further tailors audit requirements by business size and year.
- The Act seeks to balance accuracy and oversight with the practical realities of smaller distributors.
1) Independent Audit Requirements by Distributor Size
- Distributors with at least 75 million deposit beverage containers in a calendar year (ending in an even number) must obtain an independent audit for the next calendar year.
- Distributors with 5 million to less than 75 million containers (calendar year ending in 4 or 9) must obtain an independent audit for the next calendar year after that ending year.
- Distributors with fewer than 5 million containers are exempt from the independent audit requirement.
2) Contents and Timing of Independent Audits
- Audits must assess:
- The accuracy of inventory reports and payments to the Department of Health (DOH) required by the program.
- The accuracy of fees collected in relation to deposits, transfers, or donations of deposit beverage containers to/from other distributors and dealers.
- A certification that the audit is accurate to the best of the auditor’s knowledge.
- Audits must be submitted to the department by September 30 of the calendar year after the year in which the audit is required.
3) Definitions
- Adds a definition of “Distribute” as manufacturing beverages in deposit beverage containers within Hawaii or importing and selling filled containers to a dealer or consumer.
4) Risk-Based Audit Process (Administrative Provisions)
- The Department of Health must develop a risk-based process to select which distributors and redemption centers are audited, using factors such as money transacted, prior audit findings, and audit frequency.
- The department may hire personnel or external consultants for audits.
- Requirements include potential monthly or semi-annual reporting from distributors, data submission (invoices, shipping documents, POS reports, etc.), and data analytics to identify unusual fluctuations.
- The department may create a web-based system to facilitate required report submissions.
5) Post-Audit Actions and Transparency
- The department must summarize audit results and consider enforcement actions, follow-up audits, and potential public disclosure of violations.
6) Internal Controls by Distributors
- All distributors must develop and submit an internal control process to the DOH for approval, ensuring monthly/biweekly distribution reports are accurate and records are maintained.
- Distribution report forms must reflect accurate data; the new requirement to obtain independent audits applies as specified above.
7) Effective Date
- The act takes effect upon approval (June 25, 2026).
Compiled from official sources — confirm details with the bill’s official record.
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