EPA-230/9-83-006
Report to
U.S. Environmental
Protection Agenc\
February 1984
AjtjiUT D. Little, Inc.
Confer for Environmental Assurance
€PANo. EPA-230-09-83-OOQ
icy
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PREFACE
This report provides a discussion of environmental auditing fol-
lowed by detailed descriptions of five individual audit programs. It has
been developed to help further the understanding of environmental
auditing and how various companies approach the subject. The des-
criptions of the environmental auditing programs of the five companies
in this report are based on in-depth interviews with the companies'
audit program managers. Examples of the various program documents—
checklists, protocols, audit reports, etc.—obtained from each company
are included in the company profiles to help the reader further under-
stand the nature and scope of each program described and some of the
key alternatives available in designing an audit program.
The companies profiled in this report represent a diversity of
auditing approaches, as well as a variety of industry segments. All
have management support for their programs and have made significant
commitments to their environmental auditing effort. Each company
willingly agreed to discuss its audit program in detail and provide
examples of its program approach and supporting materials.
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NOTICE
This report has been prepared under contract no. 68-01-6160 for
the Regulatory Reform Staff, Office of Policy, Planning and Evaluation,
U.S. Environmental Protection Agency. The programs described in this
report were selected to provide instructive examples of five companies'
environmental auditing activities. The report reflects the findings and
conclusions of the author and not necessarily those of EPA or any other
government entity; and mention of any company names, products or
processes does not constitute EPA endorsement.
This report is designed to provide accurate and authoritative
information with regard to the subject matter covered. However, it is
provided with the understanding that the contents reflect Arthur D.
Little's best judgment in light of the information available at the time of
preparation. Neither Arthur D. Little, Inc., nor the participating
companies make any warranty or assume any liability with respect to the
use of any information contained in this report. If specific compliance
advice or assistance is required, the services of a competent profes-
sional should be sought.
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TABLE OF CONTENTS
PAGE
PREFACE i
I. OVERVIEW OF ENVIRONMENTAL AUDITING 1
II. OLIN CORPORATION'S REGULATORY AUDIT PROGRAM 13
III. ALLIED CORPORATION'S HEALTH, SAFETY,
AND ENVIRONMENTAL SURVEILLANCE PROGRAM 33
IV. POLAROID CORPORATION'S ENVIRONMENTAL
AUDIT PROGRAM 53
V. PENNSYLVANIA POWER & LIGHT COMPANY'S
ENVIRONMENTAL QUALITY ASSESSMENT PROGRAM 67
VI. MILLIPORE CORPORATION'S GOVERNMENT
AND REGULATORY AFFAIRS AUDIT PROGRAM 91
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I. OVERVIEW OF ENVIRONMENTAL AUDITING
WHAT IS ENVIRONMENTAL AUDITING?
The word "audit" has become associated with a wide variety of
efforts, activities, and programs intended to examine the performance of
an operation and determine or verify its accuracy and appropriateness.
Auditing, in its most common sense, is a methodical examination, involv-
ing analyses, tests, and confirmations of local procedures and practices
leading to a verification of compliance with legal requirements, internal
policies, and/or accepted practices. Many corporations have established
programs to monitor and "audit" the performance of environmental
activities and have come to see environmental auditing as a powerful
management tool to help determine the compliance status and environ-
mental performance of operating facilities.
Companies use various names to describe these programs. "Audit"
is the most common, although review, surveillance, survey, appraisal,
and assessment are also used. Some companies have deliberately chosen
not to use the word audit, sometimes at the request of legal or financial
staff. Others use audit precisely to lend credibility to their programs.
Of the five companies in this study, only three use the term audit to
describe their program. The remaining two use the terms assessment
and surveillance for their overall program; however, one of these
companies refers to their facility reviews as "audits" and the individuals
who conduct them as "auditors."
WHY AUDIT?
Motivations for developing an environmental auditing program range
from the desire to measure compliance with specific regulations, stan-
dards, or policies to the goal of identifying potentially hazardous con-
ditions for which standards may not exist. Thus, while auditing may
appear to serve the universal need of evaluating and verifying environ-
mental compliance, in practice auditing programs are designed to meet a
broad range of objectives, depending on the corporate culture, manage-
ment philosophy, and size.
Companies have established environmental auditing programs to:
• Determine and document compliance status.
• Help improve overall environmental performance at the operat-
ing facilities.
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• Assist facility management.
• Increase the overall level of environmental awareness.
• Accelerate the overall development of environmental manage-
ment control systems.
• Improve the environmental risk management system.
• Protect the corporation from potential liabilities.
• Develop a basis for optimizing environmental resources.
Though these objectives all address compliance, they can produce
differences in program scope and focus. For example, some programs
focus on determining present and past compliance over a specified time;
others focus on determining compliance only at the time of the audit;
still others focus on helping the plant manager achieve or maintain com-
pliance. There is a trend to move beyond auditing compliance status to
auditing the environmental management control system (the system of
controls and mechanisms that are in place to ensure compliance). This
trend is likely to increase in coming years, since it provides the tools
and information needed to assess environmental compliance. It can
extend the value of the audit by confirming that appropriate systems
are in place and functioning to manage compliance rather than merely
determining the compliance status at the time of the audit.
There is considerable diversity in the extent to which the goals
and objectives of audit programs are documented. Some programs
(including three of the five in this study) have a written corporate
statement describing the audit program. Some (including two of the
five programs) have written position descriptions for the audit program
manager and audit staff.
PROGRAM ORGANIZATION AND STAFFING
In deciding where to house the audit program within their organi-
zation, some companies emphasize independence for the audit function
while others emphasize accessibility to and familiarity with the informa-
tion to be audited. Typically companies establish audit programs within
a core corporate group. This core group is most commonly found
within the corporate environmental function, but in some companies is
located in the internal audit department, regulatory affairs department,
production or operations department, or legal department.
Companies choosing to house their environmental audit program in
the internal audit department tend to view the program more as a
corporate than as an environmental management tool. Production or
operations departments are sometimes chosen to reflect or reinforce a
company's philosophy that operations is responsible for environmental
management. The legal department may be chosen because of sensi-
tivity to potential legal issues involved in environmental auditing (e.g.,
potential disclosure of sensitive audit information).
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.Wherever the audit program is housed, the legal department usu-
ally is involved in the initial development of an environmental audit
program and plays a central role in developing the audit reporting
process. As the audit program becomes more established, the legal
department's role in the audit program often is limited to providing
advice on regulatory interpretations and to review the audit reports.
However, the legal department usually is more actively involved when
an audit uncovers a significant noncompliance situation. None of the
companies in this study houses its audit program in the legal depart-
ment, although one company's program (as well as its environmental
management department) organizationally reports to the General
Counsel.
Typically, an audit program is funded in a manner consistent with
the environmental and other corporate staff functions. In most com-
panies, costs are absorbed as overhead and included in the budget of
the organizational unit responsible for the program. However, in a few
companies, audit costs are charged back directly to the audited facili-
ties (usually where a company directly charges back the costs of many
corporate staff activities). It is not unusual to charge travel and
out-of-pocket expenses to an individual's assigned organizational unit
when a company uses staff for the audit on a part-time or special-
assignment basis.
Companies staff their environmental audit programs' in a variety of
ways. Most environmental audit teams include individuals with technical
expertise, knowledge of environmental regulations, and plant experi-
ence. Several companies also include auditing expertise, knowledge of
environmental management systems, and understanding of similar com-
panies' hazard control programs as staffing criteria. Audit teams
usually include environmental specialists and may also include a plant
manager, process engineer, attorney, analytical chemist, internal audi-
tor, toxicologist, or outside consultant.
Some companies have a full-time audit program manager; others
staff their audit program only on a part-time basis. Of the companies
that staff their program on a part-time basis, some do not conduct
enough audits to justify full-time staff while others want to vary par-
ticipation in their program by rotating the audit team membership.
Some rotate the membership of the audit team to involve a wider range
of staff; other companies vary their team membership to get the specific
expertise desired for a particular audit. Of the five companies featured
in this study, two staff their audits entirely with full-time auditors;
two rotate the audit team assignments among environmental
professionals; and one uses a combination of full-time auditors and
rotating team members.
Using the same auditors for every audit (as opposed to rotating
the membership of the audit team) provides greater continuity from
audit to audit, and generally greater confidence that the goals and
objectives of the program are being met.
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AUDIT SCOPE AND FOCUS
Companies define the scope and focus of an audit in organizational,
geographical, locational, functional, and compliance contexts. Organiza-
tional boundaries address which of the corporation's operations are
included in the audit program. They generally depend on the organiza-
tion structure, business unit reporting relationships, and corporate
culture. Geographical boundaries address how far or widely the pro-
gram applies (state or regional, national or international). Selection of
geographical boundaries generally depends upon the location of facilities
and offices, and the nature of products and services.
Locational boundaries address what territory is included in a
specific audit. In many cases, the audit focus is on the activities
within the plant boundary. However, some companies audit beyond
plant boundaries. For example, an audit could also include a nearby
river or lake if there is a potential for environmental damage, off-site
manufacturing or packaging activities, off-site waste disposal activities,
or local residences. Additionally, many companies include the activities
of a tenant producer located on plant property in the scope of their
audit. One of the companies featured in this report has developed
specific audit procedures for reviewing its facilities' contractor pro-
grams for hazardous waste disposal. The auditors review the records
available at the manufacturing facility, and examine the contractor's
training, safety/security, storage, handling, treatment, and environ-
mental monitoring activities. Another company, whose operating divi-
sions are responsible for managing off-site disposal, audits each divi-
sion to ensure that these activities are handled in a manner consistent
with corporate policy. Yet another company's audit team occasionally
follows a waste hauler to a disposal site to confirm that waste is going
to the appropriate location and to observe any problems enroute.
A number of specific functions or subject areas can be included in
an environmental audit program. While many audit programs cover air
and water pollution control as well as solid waste management, several
also include one or more other areas such as occupational health, occu-
pational safety, and product safety. If all environmental, health, and
safety disciplines are housed in the same organizational unit, the scope
of the audit program is more likely to include these other subject areas.
Finally, compliance boundaries define the standards against which
the facility is measured. These standards can include federal, state,
and local laws and regulations; corporate policies, procedures and
guidelines; division or operating company policies, procedures and
guidelines; local facility operating procedures; or standards established
by an outside group such as an industry association.
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AUDIT APPROACH
A number of basic activities are common among most audit pro-
grams. Some activities are undertaken before the on-site audit, some
during the audit field work, and others after the field audit has been
completed. Virtually all environmental audits involve gathering infor-
mation, analyzing facts, making judgments about the status of the
facility, and reporting the results to some level of management. A team
approach is commonly used to conduct these activities. Even with these
basic similarities, there are a number of important differences as
illustrated in this study.
Figure 1 presents a simplified model of a basic audit program.
Most companies, including each of those profiled in this study, make
some provision for including each of the following steps in their audit
process.
Audit Planning
The environmental audit process usually begins with a number of
activities before the actual on-site audit takes place. Some companies
audit all facilities on a repeat cycle (e.g., annually or every two
years). In companies not auditing all facilities on a specific repeat
cycle, the facilities that will be audited must be selected and scheduled.
A list may be drawn up annually and modified throughout the year.
Companies select facilities for audit by a number of methods, including
random selection, perceived hazards, and business importance.
Initial arrangements relating to a facility audit include scheduling
the visit, selecting the audit team, and gathering and reviewing back-
ground information. Initial notice of an upcoming audit (audit lead
time) varies from company to company and may be anywhere from one to
six months. However, one company featured in this study gives
advance notice of only a few days in order to achieve the advantage of
surprise and obtain what it believes to be a more accurate picture of
facility operations.
Information gathering generally begins well in advance of the audit
and includes regulatory requirements, corporate policies and facility
information (organization, processes and layout). Some companies' audit
teams visit the facility in advance of the audit to develop a basic
understanding of facility processes and environmental management
systems, and to brief the facility staff on the objectives of the
upcoming audit. Collection and review of advance information results in
an audit plan outlining the needed audit steps, how each is to be
accomplished, who will do them, and in what sequence.
Step 1: Understand Internal Management Systems and Procedures
Most audits begin by developing a working understanding of how
the facility manages activities that may affect environmental perfor-
mance. This usually includes developing an understanding of facility
processes, internal controls (both management and engineering), plant
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Figure 1
BASIC STEPS IN THE TYPICAL AUDIT PROCESS
AUDIT PLANNING
Document scope in
working papers
\
STEP 1:
UNDERSTAND INTERNAL MANAGEMENT
SYSTEMS AND PROCEDURES
STEP 2:
ASSESS STRENGTHS AND WEAKNESSES
OF INTERNAL CONTROLS
STEP 3:
GATHER AUDIT EVIDENCE
STEP 4:
EVALUATE AUDIT FINDINGS
STEP 5:
REPORT AUDIT FINDINGS
Record understanding in
working papers
AUDIT FOLLOW-UP
Record assessment of sound-
ness of system design
Document verification
testing plan and results
Note exulanation and dis-
position oj alT jindings
and observations
Document discussion
of findings with
facility management
Document significant
findings in report
-, To management
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organization and responsibilities, compliance parameters and other
applicable requirements, and any current or past problems. This step
allows the team members to understand the actions intended to be taken
within the organization to assist in regulating and directing its
activities.
In developing this picture of internal management systems, audi-
tors usually draw on information from multiple sources. These may
include selected information provided by the facility in advance of the
audit, a specially designed internal control questionnaire, staff dis-
cussions, and plant tours. Using questionnaires, discussions, and/or
tours as background, auditors further investigate the more detailed
aspects of key control practices and procedures through in-depth
interviews, guided discussions, and additional tours to specific sites.
The data-gathering methods most used in Step 1 are inquiry and obser-
vation.
Step 2; Assess Strengths and Weaknesses of Internal Controls
After clearly understanding how various aspects of environmental
compliance and performance are intended to be managed, auditors then
evaluate the soundness of the facility's management systems and pro-
cedures to determine whether they are functioning and will achieve the
desired performance.
In assessing the strengths and weaknesses of internal controls,
auditors typically look for such indicators as clearly defined respon-
sibilities, an adequate system of authorizations, capable personnel,
documentation, and internal verification. It is far easier to identify
significant weaknesses in internal controls than to determine adequacy.
Each of these indicators usually requires significant judgment on the
part of the auditor since there are no widely accepted standards an
auditor can use as a guide to what is acceptable internal control.
Thus, many auditors look to the audit program objectives, as well as to
the corporation's basic environmental philosophy, for guidance about
what is satisfactory internal control.
Step 3: Gather Audit Evidence
Audit evidence forms the basis on which the team determines
compliance with laws, regulations, corporate policies, and/or other
standards. Evidence is gathered in a variety of ways, including
records reviews, examination of available data, and interviews with
facility personnel. Relatively few companies actually sample and analyze
emissions or effluent as a regular part of their audits. Many companies
outline or describe their audit procedures in some type of protocol,
questionnaire, or checklist to guide the auditor in collecting audit
evidence.
Suspected weaknesses in the management system are confirmed in
this step. Also, management systems that appear sound are tested to
verify that they work as planned and are consistently effective.
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Audit procedures (the means by which auditors collect audit evi-
dence) fall into three broad categories:
Inquiry—the auditor asks questions both formally and infor-
mally . Audit questionnaires are common examples of formal
inquiry.
Observation—the auditor collects evidence through what can
be seen, heard, or touched. Because physical examination is
often one of the most reliable sources of audit evidence,
observation is a significant aspect of most environmental
audits.
Verification Testing—the auditor focuses on either the man-
agement system or pollution control equipment and performs
systems tests. For example, retracing data would uncover
errors in recording original data. Other common types of
testing include verifying paper trails and equipment checks.
Programs vary regarding the amount and balance of inquiry,
observation, and verification testing. Some programs depend on
inquiry as the primary means of gathering audit evidence. Inquiry is
easy, provides rapid feedback, and does not require as many
resources. Many of the more sophisticated environmental audit pro-
grams- (including three of the five programs in this study) conduct a
considerable amount of verification testing to determine whether man-
agement systems and equipment perform as they are supposed to. For
each item to be audited, inquiry typically takes a matter of minutes,
observation can take tens of minutes, and testing a matter of hours.
Thus, the more items to be verified, the larger the resource commitment
required. Almost always, more items could be verified (and more ways
to verify each item are possible) than available audit resources allow.
However, environmental audits usually serve as a check on the environ-
mental management system rather than as a substitute for it. There-
fore, most audit programs do not look at every situation, item, or
document.
Step 4: Evaluate Audit Findings
Once evidence-gathering is complete, the audit findings and obser-
vations are evaluated. Audit evidence is reviewed in terms of program
goals to determine both whether audit objectives were met and the
significance of the audit findings.
While auditors usually make preliminary evaluations of their obser-
vations throughout the audit, most audit teams devote a few hours at
the end of the audit to jointly discuss, evaluate, and finalize these
tentative audit findings.
Step 5: Report Audit Findings
The reporting process usually begins with an exit meeting between
the audit team and facility personnel. During this meeting, the audit
team communicates the observations and findings noted during the
audit. Findings are then clarified and their ultimate disposition dis-
cussed.
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Most companies (including all five in this study) prepare a written
audit report. In most cases, the purposes of the report are to provide
management with information about compliance status; to initiate cor-
rective action; and to document how the audit was conducted, what it
covered, and what was found.
Some companies prepare a draft of the audit report bn-site. Most,
however, prepare a draft audit report shortly after the on-site audit is
completed. This draft usually undergoes review and comment before a
final report is issued. Report reviewers often include the environ-
mental affairs department, legal department, facility management, and
the audit team.
The content of the audit report varies considerably from company
to company. Typically, audit reports contain a background or intro-
duction section which lists the purpose and scope of the audit and
identifies the audit team leader, team members, and other key audit
participants. Most audit reports include sections on the facility's
overall compliance with regulations, as well as compliance with the
corporation's policies and procedures. Some audit reports identify all
applicable facility operations; some include a detailed description of the
facility and its history, an impression of the facility management's
ability to handle environmental crises, and/or recommendations and
action plans.
The content of audit reports is strongly linked to the overall
objective of the audit program. If the audit program is to provide
assurance to management, the audit report often is limited to a factual
description of the more significant findings and exceptions. On the
other hand, if the goal of the audit program is to assist the facility
manager, the audit report often is detailed enough to let the facility
manager know precisely what was wrong and may include recommenda-
tions on how to improve the situation.
An effective reporting process communicates issues to appropriate
persons within the company. Many companies have established a mul-
tiple or hierarchical reporting scheme. Under such a reporting pro-
cess, the type of information and level of detail to be provided in an
audit report depend on the problem identified and the individual who
has to be notified. Some items may require reporting to corporate
management and future follow-up; others may require only the attention
of the facility manager.
Many companies' audit reports, including each of those in this
study, receive a relatively wide distribution. Typically, audit reports
are distributed to the manager of the audited facility and the corporate
environmental affairs department. Some companies also distribute the
report to various levels of operating and line management, the legal
department, and the members of the audit team.
While much has been written about protecting the confidentiality of
the audit report, most programs—especially those that conduct a large
number of audits each year—do not routinely take elaborate steps to
assert the confidentiality of the audit report. For example, the five
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firms in this study do not regularly take steps to preserve the con-
fidentiality of their audit reports. Instead, care is taken in preparing
the report and ensuring timely, appropriate follow-up. The audit
report is typically treated as an internal management communication and
distributed to those with a need to know.
Audit Follow-Up
Most companies have established formal procedures for responding
to the audit report. The action planning process is initiated as audit
findings are identified. It can include assigning responsibility for
corrective action; determining potential solutions and preparing recom-
mendations to correct any deficiencies noted in the audit report; and
establishing timetables. Typically, responses to the audit report are
prepared by the facility manager and sent to management and the audit
program manager for review. A few companies (and one in this study)
incorporate the action plan into the final report.
Typically, action plans are monitored by an individual with res-
ponsibility for follow-up—generally either operating management, envi-
ronmental affairs, or, in a few cases, the auditors. In most instances,
follow-up involves a written or oral inquiry as to the status of the
planned action. In companies where facilities are audited on a repeat
basis within a specified time, the auditor or audit program manager is
usually directly involved in, and central to, action plan follow-up.
Where an audit team is unlikely to return to the facility for some time,
operating management or environmental affairs usually assumes responsi-
bility for follow-up. Audit program managers at two of the five com-
panies in this report are responsible for audit follow-up.
BASIC AUDIT TOOLS
The environmental audit process is most commonly supported by
two important tools: the audit protocol and the working papers. While
there is considerable latitude in current practice, most environmental
auditing programs use some form of these two devices.
Audit Protocols
Names for the various documents which guide the auditor while
conducting the audit include audit protocols, audit work programs,
review programs, checklists, and audit guides. In this discussion, the
term "audit protocol" will be used.
An audit protocol represents a plan of what the auditor is to do to
accomplish the objectives of the audit. It lists the audit procedures
that are to be performed to gain evidence about environmental prac-
tices. An audit protocol also provides the basis for assigning specific
tasks to individual members of the audit team, for comparing what was
accomplished with what was planned, and for summarizing and recording
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the work accomplished. A well-designed audit protocol can also be used
to help train inexperienced auditors and thus reduce the amount of
supervision required by the audit team leader. Many companies use the
audit protocol to help build consistency into the audit, particularly
where rotating audit teams are used.
The audit protocol can be formatted in a variety of ways. For
example, some companies use a protocol which organizes audit pro-
cedures into a sequence of audit steps and provides space for
identifying team assignments and brief notations. Some use an outline
which lists the topics to be covered during the audit but does not
specify the precise manner in which each topic is to be reviewed. Still
other companies may use a detailed guide (which emphasizes the basic
regulatory requirements); a yes/no questionnaire (which incorporates
most regulatory provisions into questions); or a scored questionnaire
(which elicits numerical ratings in which responses are scored against
previously developed criteria).
Working Papers
Working papers document the work performed, the techniques
used, and the conclusions reached by the auditors. Working papers
help the auditor achieve the audit objectives and provide reasonable
assurance that an adequate audit was performed consistent with audit
program goals and objectives. Working papers often include documenta-
tion of compliance as well as non-compliance.
Working papers are usually handwritten and include photocopies of
several documents selected by the auditor to help substantiate the
audit's findings. They are written while performing the field work.
Working papers are not a report that the auditor prepares from notes
after the audit is complete; rather, they are the auditor's field notes to
keep track of audit procedures undertaken, results achieved, and items
requiring further information.
Most working papers include notes of audit planning; the completed
copy of the audit protocol annotated with work paper references and
auditor's initials; the completed internal control questionnaire, results
of compliance testing, and evaluations of internal control; descriptions
of all functional tests (e.g., performance of pollution control equipment)
and transactional tests (e.g., documentation of hazardous waste ship-
ments) conducted during the audit; documentation of all audit proce-
dures and evidence obtained; and notes on any conferences. Some
working papers also contain a listing of the facility's materials and their
uses; copies of all regulatory permits for the environmental area under
review; questionnaires and flow charts of internal controls; schedules of
documentation and recordkeeping; and copies of previous audit findings
and observations.
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SELECTED CASE EXAMPLES
Five innovative environmental auditing programs are profiled in the
following sections of this report. These five programs have been
selected as examples of current environmental auditing practices. While
no five programs could capture the full array of current practices, the
descriptions of the featured programs, thanks to the cooperation and
candor of the participating companies, provide an in-depth look at the
internal workings of established environmental auditing programs.
The five programs have also been selected because of their diver-
sity in organization, staffing, scope and focus, and audit methodology.
For example, the organizational diversity of the programs profiled is
reflected both by where the program is housed within the organization
and how the program is staffed. One program is housed within the
Internal Audit Department; one program reports to the General Counsel.
The remaining three are housed within the Corporate Environmental
Department. However, two of these three programs have separate audit
departments within this corporate group—and thus are not involved
with the day-to-day responsibilities of environmental compliance.
Three of the companies in this report have full-time audit program
managers; two have full-time staffs of environmental auditors; and three
companies use -a rotating staff of auditors from corporate or division
environmental departments. One company also includes an outside
consultant on each audit team.
As illustrated in the following sections of this report, there is also
a variety of approaches to audit protocols or guides, to working papers
and audit recordkeeping, and to reporting of audit findings. These
profiles are intended to provide not only a better understanding of
environmental auditing, but also useful models for firms seeking to
establish or improve their environmental auditing programs.
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II. OLIN CORPORATION'S REGULATORY AUDIT PROGRAM
Olin Corporation's environmental audit program, called Regulatory
Audits, started in 1978. A driving force leading to the program's
creation was an incident in which the company learned that three
employees had submitted false information to Olin management and
government officials. This led to a mandate from the Chief Executive
Office to improve controls over regulatory reporting. Another reason
for the program was the Chief Executive Officer's increasing concern
about the proliferation of environmental regulations. He felt that Olin's
operating employees might not fully understand these regulations.
Given the number of employees (17,000+), the number of divisions (6),
the number of U.S. manufacturing facilities (52), and the diversity of
its product lines (chemical, metals, specialty papers, ammunition, pool
sanitizing products, and home building), this lack of understanding
could lead to incidents that have a significant impact on Olin's busi-
ness. The company viewed an audit program as a mechanism by which
to evaluate the degree of compliance and impress upon all employees
Olin's commitment to comply with all laws and regulations.
Olin's audit program has strong support from top management both
publicly and internally. There are a number of examples of this sup-
port: a written corporate policy on Internal Auditing stating the major
objectives of the Regulatory Audit Program; mention of the initiation of
the program in the President's Message in Olin's 1978 Annual Report;
and a yearly statement about the Regulatory Auditors at Olin's Annual
Meeting of the stockholders. Although there is no formal written
description of the audit program, the program is communicated through-
out Olin by the CEO and top management via writings and during visits
to the facilities. The audit program is also described frequently
through articles in the company magazine.
Olin's program is called Regulatory Audits because the audit
program includes a wide variety of legal and regulatory issues, not just
environmental matters. The word "audit" is used because the program
is specifically designed to be as rigorous, independent and objective as
a financial audit. The program is housed within the Internal Audit
Department and has a staff of five full-time auditors.
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BACKGROUND
Before describing the audit program, it is useful first to look at
how Olin's environmental activities are managed. Olin has organizations
at the corporate, division, and facility levels responsible for environ-
mental affairs. While environmental affairs is largely a decentralized
function, there is a small corporate department consisting of the Corpo-
rate Director of Environmental Affairs and Energy and one assistant.
This staff group has responsibility for tracking environmental projects,
consolidating reports to the Chief Executive Officer, and working on
specific areas of concern to Olin management.
The basic environmental philosophy of Olin is that each of the
Divisions is responsible for its environmental activities just as they are
for other matters. To meet this responsibility, most divisions have
established an environmental affairs department. These departments are
responsible for: identifying key environmental, legislative, and regu-
latory issues; determining how these issues affect each of the division's
facilities; and assisting facility personnel in developing methods for
controlling and monitoring environmental activities.
The size of the environmental affairs department varies from
division to division. The Chemicals Division has the largest divisional
environmental affairs department with a staff of 23 employees. At the
other end of the spectrum, the Housing Division uses local engineering
consultants to advise it on environmental issues and does not have a
separate environmental department. Within the six divisions, 35 people
are directly concerned with environmental affairs. Division environ-
mental groups are separate and autonomous from the Corporate Depart-
ment, with no direct reporting relationship or accountability.
At each facility, at least one person is responsible for managing
environmental activities. The size of the facility environmental staff
varies, but typically there is one person full-time or half-time.
Approximately 50 people within the facilities have environmental res-
ponsibilities .
PROGRAM PURPOSE
Olin's audit program has four objectives:
• To determine that operating units are complying with laws and
regulations;
• To determine that Corporate and operating units have estab-
lished appropriate procedures to ensure compliance with laws
and regulations;
• To verify that such systems and procedures are operating as
planned; and
• To audit, en a test basis, the accuracy of governmental
reports submitted by Olin.
14
/^ Arthur D. little Inc.
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These objectives were communicated to operating management in the
Executive Bulletin that was distributed at the initiation of the audit
program.
Olin has written corporate policies relating to environmental
affairs. One is an environmental policy which states the roles and
responsibilities of corporate management regarding environmental
affairs. (See Exhibit 1.) All Olin corporate policies are initiated by a
member of senior management who determines that a policy is required
and then requests the Manager of Procedures to write the policy. The
policy is then circulated to all divisions for comments. The final policy
is approved by the CEO or other member of senior management and
issued to all locations.
Olin believes the procedures and guidelines to comply with envi-
ronmental regulations are basically contained within the regulations
themselves. Thus, there are no written procedures or guidelines at the
corporate or division level.
While there are no written procedures at the corporate or division
level, the facilities have written policies and procedures in such areas
as spill prevention (Spill Prevention Control and Countermeasures
Plan), contingency plans, response plans, advice to employees on
hazardous substances, etc. Facility policies are issued by the Facility
Manager with the assistance of the Environmental Affairs Department
and legal staff. These policies are updated as a result of process,
product, or raw material changes. A procedure or guideline is
updated, on average, about every two years. There are also written
operating procedures at the facilities, where required, with specific
instructions on what to do, such as start-up/shut-down procedures,
sampling procedures, etc.
ORGANIZATION AND STAFFING
The Regulatory Audit Department, housed in the Internal Audit
Department, is headed by the Manager, Regulatory Audits, one of a
staff of five full-time auditors. The Manager, Regulatory Audits,
reports to the Chief Internal Auditor who in turn reports to the
Chairman of the Board and Chief Executive Officer. (See Figure 1.)
The Regulatory Audit Department is an independent group with no
formal organizational connections to the divisions, or other departments
such as Environmental Affairs. A communications linkage is created
with the facility both during and after an audit. The Regulatory
auditors also communicate with division and corporate legal staffs for
the purpose of defining regulations and obtaining regulatory advice.
Audit team members are all full-time professional auditors assigned
to the Regulatory Audit Department. All have a technical degree and
most have ten years or more of plant or related experience. Other
qualifications of the audit team members include a skill in inquiry
techniques, good communications skills, and knowledge of regulatory
15
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EXHIBIT 1
OLIN'S ENVIRONMENTAL POLICY STATEMENT
Olin
Policy
NUMBER 4 Q
ENVIRONMENTAL PROTECTION
Stitement
of Policy
Implement! tion
Responsibility
It is Olin policy to conduct its operations in such a manner as to
protect the environment. As a minimum, this means that Oun will
comply with all applicable laws and regulations.
In its operations Olin will:
1. Ensure that every facility complies with established stan-
dards, regulations and permit conditions.
2. Exercise whatever control is reasonably necessary, in
Olin's judgment, to avoid serious harm to the environment.
whether or not such control is required by regulations.
Environmental regulations must be established with great care, be-
cause the resulting costs will be borne by society as a whole. Soci-
ety's environmental and economic well-being are interrelated.
In addressing proposed laws and regulations. Olin will:
1. Participate, directly or through trade associations, with
national, state and local bodies to assure to the best of its
ability that new legislation and regulations serve the public
interest, are sound and realistic and have sufficient merit
to be sustained.
2. Oppose standards that are capricious, unrealistic or
that because of their ineffectiveness must be frequently
changed.
Each Croup President is responsible for compliance with this pol-
icy in the Group's operations, and for establishing control proce-
dures which can be audited. Any proposed commitment to regu-
latory agencies which will require actions exceeding the authority
of the Croup President will be reviewed in advance with the Chief
Executive Office.
Each Group President is also responsible, jointly with the Cor-
porate Director of Environmental and Energy Affairs and the
Corporate Regulatory Counsel, for participation in the develop-
ment of laws and regulations in areas in which the Group has an
interest, provided that the Washington Office is responsible for
coordinating Olin's efforts to influence Congressional legislation.
The Corporate Director of Environmental and Energy Affairs will
maintain oversight over the Company's environmental activities
and will be responsible for advising the Chief Executive Office and
the individual Group managements on the adequacy of compliance
with this policy. Group Presidents will facilitate this function by
making information available as needed.
Date: September 1, 1980
/ti Arthur D. Little, Inc.
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FIGURE 1
REGULATORY AUDITING RELATIONSHIPS
I
P
S
ro
Chief Internal
Auditor
Chief
Executive
Office
SENIOR MANAGEMENT
Corporate
Vice President
Legal
Corporate
Vice President
Operational
Services
Division
President
(6)
Regulatory
Auditing
Environmental
Affairs
Vice President
Manufacturing
Vice President
Legal
Vice President
Technical
Vice President
Marketing
Facility
Manager
Environmental
Affairs
Facility
Environmental
Staff
T
CORPORATE
OPERATING DIVISIONS
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procedures and requirements. There are written job descriptions for
each individual within the Internal Audit Department which include
criteria for the audit team members. (See Exhibit 2.) In addition,
each auditor prepares yearly written self-objectives. Olin has an
extensive 78-page written audit manual which lists the standards and
criteria the auditor is to follow.
Olin's Manager, Regulatory Audits, is active in a variety of pro-
fessional and trade associations, ad-hoc groups, and informal networks
where environmental auditing is discussed. He sees his participation as
helping communicate to others outside Olin what Olin is trying to do.
Audits generally last five days with typically three auditors on the
team. The staffing objective is to have enough people on the team to
get the audit accomplished in one week. The yearly budget for the
audit program is approximately $400,000 with five full-time people.
AUDIT SCOPE AND FOCUS
The scope and focus of Olin's audit program are broad and include
both U.S. and international locations. Joint ventures or off-site dis-
posal activities are not regularly included since these are the respon-
sibility of each division. However, the audit program has the respon-
sibility for ensuring that off-site disposal activities are, in fact,
handled by the division. On occasion, the audit team goes outside the
plant boundary to a third-party terminal. This, however, would be a
special audit with specific objectives which may or may not include
portions of the functional scope described below.
The scope of each individual audit includes federal, state, and
local regulations; permits; corporate, division, and facility policies and
procedures; corporate records and technical data; environmental control
systems; quality assurance programs; codes; contractual and licensing
requirements; and, occasionally, hazard identification.
The functional scope of the audit program and each individual
audit can include up to 40 subjects within the following broad topics:
Air pollution control
Water pollution control
Solid and hazardous waste management
Polychlorinated biphenyls
Spill prevention control and countermeasures
Radioactive wastes
Federal Insecticide, Fungicide & Rodenticide Act
Food and Drug Administration requirements
Occupational safety and health issues
Transportation
Import/Export
Equal Employment
Coast Guard
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EXHIBIT 2
AN EXAMPLE OF A REGULATORY AUDITOR'S JOB DESCRIPTION
^I±._
CORPORATION
POSITION DESCRIPTION
Olin
OC-»I KEV Jl/77
TITLE Senior Regulatory
INCUMBENT
CROUP Corporate
' ft
•"Tier OEPT- P»£iil»Tnry i.M-' ».
wMOf SuevfVMOr's Suetrvttor
POSITION PURPOSE:
Conduct regulatory audits to determine if a location is in compliance with
federal, state and local regulations and that systems and controls have been
instituted to ensure continuing compliance. Communicate the audit findings to
appropriate levels of management. Recommend means of improving effectiveness
of controls and compliance with applicable laws and regulations.
MAJOR ACTIVITIES:
A. Planning Audit Work
1. When serving as team leader (audits performed by teams of 2-4.
auditors), plan the scope and schedule the work of'the audit to be
performed to assure adequate examination of all areas reviewed,
minimum disruption of normal operations, and valid audit results.
Review audit plan with and obtain approval of the Audit manager prior
to commencing the audit.
B. Performing Audit Work
1. Evaluate the effectiveness of procedures and controls implemented by
Olin locations to ensure compliance with governmental laws and regu-
lations and established Olin policies and procedures.
2. Verify by examination, inspection, sampling or other methods that
reports to governmental agencies have been accurately prepared,
including tracing report date back to basic source documents such as
laboratory test record books, determining that analytical tests were
performed in accordance with EPA standards, that samples were col-
lected at locations and in a manner appropriate to the requirements,
and that collection devices, recording instruments and other mechan-
ical devices are operating correctly and are adequately maintained.
3. Maintain familiarity with laws and regulations, Olin's processes and
procedures, and the methods Olin management employs to assure con-
tinuing compliance. Remain current with changes in company-wide
organization, product process and capital changes.
4. The scope of the audit work would include, but not be limited to, the
following Olin policies and regulated areas:
I. Olin Policies
Records retention
Employee information
TSCA reporting
Corporate Health & Safety procedures
Product compliance procedures
II. Environmental
Wastewater discharges
Air emissions
Hazardous waste disposal
Solid waste disposal
Arthur D. Little, Inc.
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EXHIBIT 2 (continued)
Polychlorinated biphenyls
Oil Spill Prevention Countermeasure and Control
Hazardous substances spills
Radioactive material handling procedures
III. Pesticides
Regulated controls
Labeling
IV. OSHA
Drinking water
Safety inspections
Respiratory programs
Noise controls
Maintenance inspections
Fetal vulnerability protection
Fire protection
Accident reporting
V. Transportation Requirements
VI. Export/Import Classification & Documentation
VII. Equal Employment
Affirmative action programs
Alien employment procedures
CETA
VIII. Other
Coast Guard requirements
Housing regulations
Gun sales and licenses
5. Oversee activities of less experienced auditors assigned to audit
team.
C. Reporting Audit Findings
1. Based on the audit findings, conduct thorough exit discussion with
location personnel and management regarding those findings and
resulting recommendations and suggestions for improving systems of
compliance with laws and regulations and Olin procedures.
2. Ensure, by means of the above discussion and others, as required,
that all findings are accurate and reflect regulatory requirements.
3. Prepare a draft report of recommendations and suggestions; submit
report to the Manager, Regulatory Audits.
4. Communicate all concerns to the Manager, Regulatory Audits, as soon
as possible.
OTHER SIGNIFICANT FACTORS;
Degree is required. Technical degree preferred.
Minimum ten years' work experience, preferably in Olin, the Chemical
industry or auditing or two years as either an Olin regulatory audi-
tor as an environmental auditor in another firm.
Demonstrated ability to communicate both in writing and orally is
mandatory.
Personal characteristics: mature judgment, intelligent, inquisitive,
analytical, levelheaded, assertive, and imaginative.
Willing to travel 30 to 40 percent.
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Arthur D. Little, Inc.
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• Bureau of Alcohol, Tobacco & Firearms
• Housing
• Federal Communication Commission requirements
The audit team typically spends much of its time during the audit
reviewing environmental issues. For example, a review of water dis-
charges may account for 25 percent of the audit teamrs time at the
facility. Auditing air emissions may take another 20 percent, and
auditing solid and hazardous waste disposal a further 20 percent.
Approximately 12 percent of the time is devoted to OSHA inspections,
with the remaining time spent reviewing affirmative action, pesticides,
and other regulatory areas.
While the scope of the audit program is broad, the audit depart-
ment works to avoid duplication with other corporate efforts. Other
departments (such as Environmental Affairs, Safety, Industrial Hygiene,
and Quality Assurance) perform periodic reviews. The Audit Depart-
ment uses the results of these reviews as input to its own audit efforts
to determine compliance. For example, the audit team does not perform
an in-depth OSHA audit. Each division's Safety Department performs
safety evaluations. The Audit Department reviews these evaluations to
determine whether the evaluations and recommendations have been
implemented by the facilities. Similarly, because Quality Assurance
Department conducts reviews to ensure that samples are correctly
analyzed, the Audit Department does not take samples for analysis.
The audit also includes those areas not covered by the safety evalua-
tions; for example, documentation of crane and hoist inspections, and
verifying the OSHA 200 Log (a log of all recordable occupational
injuries and illnesses).
AUDIT TIMING AND FREQUENCY
During the first year of the audit program, 53 audits each cover-
ing up to 40 regulated subjects were conducted. Seventy-two audits
were conducted in both 1980 and 1981; in 1982, some 65 audits were
conducted. Fifty audits were conducted in 1983. The number of audits
increased in 1980 because the President of the Chemicals Division had
requested that all chemical facilities be reviewed every six months.
After auditing the chemical facilities at six-month intervals, the Audit
Department recommended that the frequency of audits at these locations
be reduced back to an annual audit. The program is now operating on
an average of one-year audit cycle for all facilities. However, for
facilities with greater regulatory exposure, the audit frequency may be
accelerated. Since all facilities are audited on a yearly cycle, the
period under review covers the time since the prior audit or the prior
calendar year.
At the request of the Chairman of the Board, all audits since
December 1982 have been "surprise" audits, with a lead time of only a
couple of days. The Chairman of the Board views surprise audits as
providing a more accurate picture of the plant's operations. All loca-
tions have been notified in writing of this change in the audit program.
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Arthur n I ittlc Inc
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AUDIT METHODOLOGY
Olin's audit program is formal, comprehensive, in-depth, docu-
mented, and independent (both from the facility being audited and from
the person receiving the audit report).
The primary emphasis of the audit is to verify that a location is in
compliance with applicable regulations. This requires an in-depth
review and detailed documentation. Some regulations, such as those for
fuel usage, do not require operating records or governmental reports.
Compliance with these regulations is reviewed by Olin's regulatory
auditors in a predetermined manner. To ensure this is done, Olin has
developed separate formal audit programs (or protocols) for each audit
subject related to the functional subjects of the audit. Each program
includes the basic steps the auditor must follow and guides the auditor
by including both regulatory requirements and internal controls related
to each subject. Olin not only has audit programs for each basic audit
topic, but also has them for some aspects that other corporate programs
might not normally consider. For example, Exhibit 3 is an excerpt of
an audit program for fuel and fuel additives. By following this pro-
gram and documenting each step, the auditor ensures that all critical
regulatory points are reviewed and documented.
Most regulated areas require reports to be submitted to the
government or records to be kept for inspection. The audit programs
(protocols) for these subjects use the reports and records as vehicles
for determining whether the location is complying with regulations.
Olin has adopted this approach because it perceives the reports and
records to be the most direct and tangible communication with
government agencies. The reports and records are reviewed in depth
and the controls used to prepare the reports are assessed in order to
ensure that they are accurate and reflect the true operation of the
company.
As an example, when a waste water audit is performed, the "Dis-
charge Monitoring Report" may be the vehicle for review. It is com-
pared with the NPDES permit to ensure that it contains the necessary
data, parameters, and outfalls. Then, the data on the report is traced
to base data and all calculations are checked.
A determination is made as to whether all data are supported by
analytical tests and the tests themselves are monitored to ensure that
they meet agency requirements. Sample collection procedures are
observed to ensure samples are taken from the correct place and by the
specified method. Sample protection and delivery methods are
reviewed. Any discrepancies in sampling method, collection or protec-
tion and in analysis, computation or translation of data are noted to
indicate a potential system weakness which could result in inaccurate
reporting to government agencies. Technical, systematic or adminis-
trative improvements are recommended to correct or counteract any
potential weaknesses.
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Arthur D. Little, Inc.
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EXHIBIT 3
AUDIT PROGRAM FOR FUEL AND FUEL ADDITIVES
OLIN CORPORATION—INTERNAL AUDIT DEPARTMENT
REGULATORY AUDIT PROGRAM II-i
FUEL AND FUEL ADDITIVES
November, 1981
OBJECTIVES
The objectives of the fuel and fuel additives audit program are to determine
that:
• Procedures are in place to prevent the introduction of leaded gasoline
into any motor vehicle marked unleaded fuel only.
• Proper notices are posted at Olin-owned gasoline dispensing facilities.
• Gasoline dispensing facilities conform to regulatory requirements.
GENERAL
Federal regulation prohibits wholesale purchasers of gasoline from introducing
leaded gasoline into any vehicle which has been designed for use of unleaded fuel
only. Regulation also requires that gasoline dispensing pumps be labeled and that
dispensing nozzles meet specific requirements so that a regular gasoline nozzle will
not fit the fill tube of a vehicle designated for use of unleaded gasoline.
Ref. 40 CFR 80.22
AUDI! PROGRAM
1. Determine and note in workpapers if the location has gaso-
line dispensing facilities. If there are no such facili-
ties, proceed no further1-the regulations upon which this
audit program is based do not apply. Otherwise continue.
2. Review the invoice file(s) for all purchases of gasoline
since the prior audit. Note in the workpapers the quan-
tity of each type of gasoline purchased.
3. Obtain for the workpapers a listing of all company-owned
vehicles that use gasoline. Note the type of gasoline
each vehicle should use.
4. Determine if there is a log maintained of gasoline dis-
pensed and if it indicates the vehicle into which it was
dispensed. If it is noted that any regular gasoline was
dispensed into a vehicle that requires unleaded gasoline,
a recommendation must be made.
5. Examine the gasoline dispensing facilities and determine:
a. That the nozzle for dispensing regular gasoline is
greater than .930 inches in diameter.
b. That the nozzle for dispensing unleaded gasoline is
less than .840 inches in diameter and that the termi-
nating end has a straight section at least 2.5 inches
in length and that the nozzle has a retaining spring
that ends 3.0 inches from the terminal end.
c. That EACH gasoline pump has prominently displayed a
label that reads exactly as follows:
Federal law prohibits the introduction of any
gasoline containing lead or phosphorous into any
motor vehicle labeled "UNLEADED GASOLINE ONLY."
d. That each gasoline pump used for dispensing unleaded
gasoline has a label stating UNLEADED GASOLINE.
e. That each gasoline pump used for dispensing regular
gasoline has a prominently displayed label that
states: CONTAINS LEAD ANTI-KNOCK COMPOUNDS.
AUDITOR
W/P
Arthur D. Little, Inc.
23
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In addition to the audit programs used by the auditors for each
functional subject, other techniques used by the auditors in conducting
the audit include physical observation, examination, and investigation.
Not included in the conduct of the audit are chemical analyses and
physical tests.
Steps in the Audit Process
The basic audit steps include the following:
(1) Before beginning the audit, the audit team leader determines
which member of the audit team will review which subjects.
The more detailed subjects are reviewed first.
(2) At the beginning of the audit, the team meets with the facil-
ity manager to determine particular concerns or qxiestions that
the facility manager may have.
(3) The team then meets with the facility staff to answer any
questions they may have regarding the audit and to determine
each staff member's responsibilities.
(4) Included in every audit is a tour of the facility to observe
the production processes; to gain an overall impression of the
facilityrs working environment, potential safety hazards; and
to observe changes in operations or procedures. Chemical
usage and exposure situations are noted, as well as noise
levels, material handling equipment, aisle clearance, fire
prevention, and machine guarding devices.
(5) The audit team members carefully follow the written audit
programs and review the plant's regulatory activities, analyze
the facility's environmental reports and files, and test the
accuracy of selected governmental reports. Observations are
noted in the auditor's working papers along with the evidence
collected and the audit programs are annotated and the work-
ing papers are referenced. The auditors' activities involve
interacting with several departments (Safety and Medical,
Personnel, Manufacturing, Quality Assurance, Engineering,
Purchasing, Maintenance, and Shipping).
(6) The members of the audit team then discuss their findings
with the facility's department managers.
(7) The audit is concluded with a one to two hour exit interview
with the facility manager and his staff. This interview
provides facility personnel an opportunity to ensure that the
audit team's observations are complete and consistent with all
the facts, and that the audit team has interpreted the facts
correctly.
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Arthur D. Little, Inc.
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ASSURING AUDIT QUALITY
Quality control and quality assurance of the audit program are an
ongoing effort. Having five people perform audits can result in differ-
ences in interpreting findings and in report emphasis. To overcome
this problem, checks and balances are built into the audit program.
For example, the Manager, Regulatory Audits, reviews each audit
report with the report's author to ensure equal emphasis is given to
equal problems. The Manager, Regulatory Audits, also monitors the
team's activities during both the audit and the follow-up after the
audit. Reports are also reviewed by members of the legal staff so that
interpretations of the regulations by the auditors are accurate and
complete.
AUDIT REPORTING
Olin's reporting process has evolved over the life of the audit
program. Prior to January 1982, Olin's written audit report consisted
of brief points in outline form identifying areas of concern. The cur-
rent reporting process, in place since January 1982, was initiated at
the request of facility management who had difficulty understanding the
previous reporting process.
An audit report has three basic purposes: to report the findings
of the audit, to provide a basis for formal acceptance of the findings
by operating management, and to initiate corrective action.
Reporting Process
Olin's audit reporting process consists of the following steps:
(1) An exit interview is held with the facility manager and his
staff at the completion of the audit. Audit work is reviewed
and recommendations given. A dialogue is encouraged to
ensure all facts were obtained and correctly understood.
(2) The audit team returns home and the lead auditor prepares a
draft of the audit report.
(3) This draft report is reviewed by the Regulatory Audit Man-
ager and the Chief Internal Auditor for content and clarity.
(4) The draft is then reviewed by the division regulatory lawyer
to ensure legal references are correctly stated and applied.
(5) The draft is sent to the facility manager, his immediate
supervisor, and the Division Regulatory Coordinator for
review. They are given two weeks to respond to the draft.
(6) Any disagreements with the report's findings and
recommendations are resolved through discussions with the
facility manager. However, if conflicts remain, the Chief
Internal Auditor reviews the issues with higher levels of
management until all issues are resolved.
A 25
/L. Arthur D. Little, Inc.
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(7) After the draft is reviewed and differences resolved, the final
report is issued to the facility manager and his immediate
supervisor, Group President, operating company Vice Presi-
dent, Legal, and Environmental Affairs. This is usually 30
days after the field work ends.
Report Content
The audit report includes a listing of all topics audited and all
conclusions reached. Specific findings are listed; recommendations to
correct deficiencies are provided; and areas which could be improved
which were brought to management's attention during the audit are
listed. In addition, the report also lists those practices of the facility
which have been reviewed and found to be adequately handled. An
outline of Olin's report is given below.
OUTLINE OF OLIN'S AUDIT REPORT
I. Audit Scope
• When the audit was conducted
• What was audited
II. Questions of Regulatory Compliance
• Findings are identified relative to regulatory compliance
• Specific recommendations are given
III. Compliance with Procedures
• Findings are identified relative to corporate procedures
• Specific recommendations are given
IV. Improvement in Controls Over Regulated Matters
• Findings are identified relative to the presence and
security of administrative, technical or other controls
• Specific recommendations are given
V. Items Brought to Management's Attention
• Regulatory or procedural findings which were immediately
fixed
• Minor regulatory or procedural findings with a commit-
ment to fix
• Audit team's observations
VI. Other Items Reviewed
• Listing of areas looked at and found to be in good order
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An example of Olin's report format and language is provided in
Exhibit 4.
Follow-Up
The audit report specifies that within 60 days of the issuance of
the final report, the addressees will describe corrective actions taken
or contemplated. The response is addressed to the Division President
and a copy sent to the Manager, Regulatory Audits and all who have
received copies of the report. Olin policy states that internal auditing
is a staff function and the internal auditor has no direct responsibility
for, or authority over, any of the activities which are reviewed.
Therefore, the internal audit review and appraisal do not in any way
relieve other persons of responsibilities assigned to them. Each divi-
sion is responsible for corrective actions. The Division Coordinator is
responsible for follow-up and does so on a periodic basis to insure that
corrective actions are proper and effective, and that implementation is
timely.
In a repeat audit of a facility, the audit report will include a
statement concerning actions taken or not taken on recommendations
from past audits. Repeat recommendations from prior audits are
reported to the Chief Executive Office who will personally communicate
with the location to emphasize management's commitment to comply with
the laws and regulations and to emphasize the company's commitment to
correct problems.
Records Retention
Olin has a formal, written records retention policy. The perma-
nent file working papers (continuing permits, letters, etc.) are kept
indefinitely. The audit working papers (notes of audit tests and find-
ings) are destroyed after the facility response is received. The draft
audit report is retained until the final report is issued. The final
report is retained for ten years.
PROGRAM BENEFITS AND DEVELOPMENTS
From the perspective of the audit program manager, several bene-
fits have accrued to Olin as a result of the audit program. Top
management has assurance that employees realize that Olin is committed
to obeying the laws and regulations. As a result of the audit program,
the number of excursions has decreased. Moreover, there is certainty
that all excursions are reported. The Legal Department feels that the
observations provided by the regulatory auditors help them do a better
job and result in issues being clarified more quickly. Olin feels that
its image with regulatory agencies has improved considerably. From
management's perspective, Olin has a much more secure environmental
organization. Further, Olin's Manager, Regulatory Audits, sees his
participation in various professional and trade associations and ad-hoc
groups as helping to improve Olin's audit program by observing what
other companies are doing and by testing new ideas with other com-
panies.
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EXHIBIT 4
EXAMPLE OF OLIN'S AUDIT REPORT
REGULATORY COMPLIANCE AUDIT REPORT
HYPOTHETICAL PLANT*
OPERATING DIVISION
HOMETOWN, U.S.A.
Addressees are requested to prepare »
recommendations. This reply is due_
Address rep/v to
DATE
February 28, 1980
REPORT NUMBER
80-12-RA
Chief Internal Auditor
reply stating the action taken on all numbered
April 30, 1980
and stnd fftrrivs t<
> all others receiving the report.
Addressees:
Location Manager
Director, Operations
Copy to:
Group President
Group Vice President, Operations
Corporate Director, Environmental
Af f a irs
Corporate Regulatory Lawyer
Corporate Mgr., Regulatory Audit.
Others, if pertinent -
Director, Safety
Director, Transportation
Director, Medical
AUDIT SCOPE
During the period January 10 to January 18, 1980, we reviewed the procedures
and controls at the Hypothetical plant of the Operating Group in Hometown,
U.S.A. to ascertain the location's efforts relative to compliance with govern-
mental laws and regulations and related procedures in the subjects listed
below. We discussed regulated activities with appropriate personnel, reviewed
procedures used to ensure compliance and made tests to determine if procedures
and related controls were operating as intended. He reviewed actions taken on
recommendations made during our prior audit. We checked to determine if records
management procedures were operating in accordance with Corporate Standard Pro-
cedure (CSP) 30 and if reports had been prepared and signed in accordance with
CSP 51. We discussed our findings with local and Group personnel to ensure
that all relevant information had been obtained.
QUESTIONS OF REGULATORY COMPLIANCE
1. Hazardous Waste Storage Inspections - Federal regulation 40 CFR 265.15
requires a weekly inspection of hazardous waste storage areas.
40 CFR 265.15(d) requires these inspections be recorded In a log.
We noted that the records Indicated that inspections had been con-
ducted at three weeTc intervals during the three month period prior
to our audit. We repeat our recommendation made during the prior
audit (Report No. 79-3-RA, dated February 30, 1979) that weekly
inspections of hazardous waste storage sites be conducted and docu-
mented in compliance with the regulation.
*This report was prepared for purposes of this st'jdv. The comments contained
herein are for illustrative purposes cnly and do not reflect operating situa-
tions, actual or implied.
28
Arthur D. Little, Inc.
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EXHIBIT 4 (continued)
-2-
2. PCB Transformer Inspections - 40 CFR 761.30(a)(l) 11 and iv) require that
FCB transformers in use be Inspected every three months and that records
of the inspection be retained. We were informed that PCB transformers
at the boiler house were inspected monthly. However, we reviewed the
inspection records for the calendar year 1982 and were able to locate
documentation for only two Inspections. He recommend that all PCB
transformers be inspected at least once every three Booths and the rec-
ords of these inspections be maintained in accordance with the regula-
tion.
3. Radioactive Material Storage Control - Regulation 10 CFR 20.207 requires
that licensed materials stored in an unrestricted area be secured from
unauthorized removal. We noted that licensed materials were stored in
an unrestricted area in an unlocked cabinet and refrigerator. We recom-
mend that radioactive sources be secured as required in accordance with
the regulation.
COMPLIANCE WITH PROCEDURES
4. Medical Records Access Procedures - Procedure No. IV-3 of the Corporate
Health and Safety (CH4S) Manual requires employees be advised of their
right of access to personal medical records. However, we noted there
was no formal procedure to control and document requests for access or
for other requirements stated in the Corporate procedure. We recommend
that a procedure be established and implemented for control of employee
access to medical records as defined in Procedure No. IV-3 of the CH&S
Manual.
5. Credential/Performance Information Access - CSP 31 requires a written
procedure to ensure that only the credential/performance section of
employees' personnel files are made available to supervisors for review
in filling an open position. This procedure is to be posted at the
personnel files. The location did not have this written procedure. We
recommend a procedure be prepared and posted in conformance with CSF 31
requirements.
ITPiS BROUGHT TO MANAGEMENT'S ATTENTION
Hazardous Waste Storage Log - We reviewed the controls which had been implemented
by the location to ensure compliance with RCRA hazardous waste regulations. We
reviewed the procedure to categorize, collect and store hazardous waste. We
examined the temporary storage areas and the approved waste storage site. We
reviewed the storage and disposal log. We noted that the purchase date of cer-
tain raw materials had been incorrectly used to indicate fill start date for
containers of hazardous waste. Management accepted our suggestion to revise
their procedure by dating containers when they were determined to first contain
waste.
*This report was prepared for purposes of this study. The comments contained
herein are for illustrative purposes only and do not reflect operating situa-
tions, actual or implied.
29
Arthur D. Little, Inc.
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EXHIBIT 4 (continued)
-3-
Closure Plan - 40 CFR 265 requires that an estimated cost of closure of a
facility be included in the closure plan. We reviewed the plan and noted the
date uts absent, Our suggestion to set a date and add it to the plan was
accepted.
PCB Transformers - We reviewed PCI marking storage, annual documents, lists of
transformers on-slt« and fluid analyses. We noted that transformers #1 and 12
were not marked. Based on a review of the workpapers from prior audits.
these transformers do not appear to be PCB containing transformers. Our
suggestion that the location determine the fluid content of the transformers
and take appropriate actions based on the analytical results was accepted.
Safety Inspections - We reviewed the last division safety review and selected
11 of 47 items designated in the "B" category which were indicated as complete.
We inspected these items and noted two had not been completed or had reoccurred.
We brought these to management's attention and they were corrected during our
audit.
Affirmative Action Plan - We reviewed the location's Affirmative Action Plans
and supporting data and determined they were properly prepared and signed. «e
did note minor exceptions in the applicant log which we brought to management's
attention for resolution. We reviewed the required bulletion board postings
and noted the absence of the local EEO letter on the bulletin board. Manage-
ment accepted our suggestion to take corrective action.
OTHER ITEMS AUDITED WITH NO SIGNIFICANT EXCEPTIONS NOTED
Prior Audit Recommendations - We reviewed the recommendations made during our
prior audit (Report No. 79-3-RA, dated February 30, 1979 and determined all had
been resolved except for the recommendation repeated as Item 1 in this report.
Verification of Reports and Records - Eleven reports and records prepared since
our last audit were verified by tracing selected data to source documents,
physical inspection or tested for reasonableness.
Hazardous Waste - We reviewed the storage facility, hazardous waste manifests,
procedures for identification and analysis of new wastes and supporting docu-
mentation. We determined these were In compliance with hazardous waste regu-
lations.
Hazardous Substance Spills - We reviewed the emergency plan which Included a
section on spills and listed all regulated substances. We determined It con-
tained the necessary information and that all controls were in place to handle
spills.
Accident Classification - We examined the medical log, first-aid reports, acci-
dent investigation reports and workers' compensation payments and determined
that accidents had been properly classified and all "gray" cases documented.
*This report was prepared for purposes of this study. The comments contained
herein are for illustrative purposes only and do noc reflect operating situa-
tions, actual or implied.
30
Arthur D. Little, Inc.
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EXHIBIT 4 (continued)
-4-
TSCA 8(e) - We noted that the reporting procedure for TSCA 8fe) Substantial
Risk Notification Procedure HIS posted on the bulletin board.
Air Emissions - We determined that emissions from building ventilators were
below emission rates which trigger permit requirements. We also determined
that the boiler rating wms less than that for which the regulations re-
quire permitting and monitoring. We noted the gas/oil-fired boilers were
registered. We determined that the operating certificate renewal inspection
had been made and the state had exempted recent boiler modifications from
construction permit requirements.
Shipping - We reviewed the shipment of hazardous materials from the facility.
We noted the identification, classification and labeling of each of the items
shipped and compared the bill of lading and description with the tariff book.
We tested the controls and determined they were In operation as intended.
Manager, Regulatory Audits
Participating in the Audit:
Regulatory Auditor
Senior Regulatory Auditor
*This report was prepared for purposes of this study. The consnents contained
herein are for illustrative purposes only and do not reflect operating situa-
tions, actual or implied.
31
Arthur D. Little, Inc.
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The environmental management systems have been further devel-
oped with an increase in the number of procedures and guidelines.
Facility management views the audit program as providing help and
assistance by forewarning them of potential problems.
The audit program is constantly adjusting to new needs both from
within and outside of Olin. However, Olin does not anticipate changing
its audit program other than adding compliance requirements based on
new regulations.
32
Arthur D. Little, Inc.
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III. ALLIED CORPORATION'S HEALTH, SAFETY,
AND ENVIRONMENTAL SURVEILLANCE PROGRAM
The impetus for Allied Corporation's Health, Safety & Environ-
mental Surveillance program came in 1978 when a special committee of
the Board of Directors approved a recommendation by its outside con-
sultant to develop an environmental auditing program. This recommen-
dation followed a corporate-wide assessment of the health, safety, and
environmental status of its operations. In response to that recommen-
dation, the corporate health, safety, and environmental affairs staff,
the Corporate Audit Department, the Law Department, and the consul-
tant, with the cooperation of business and operating managers, devised
a program called the Health, Safety & Environmental Surveillance Pro-
gram.
Allied's audit program is housed as a separate activity within the
Corporate Health, Safety & Environmental Sciences Department. There
are three full-time environmental auditors who comprise the Health,
Safety & Environmental Surveillance staff. Each audit team includes at
least one member of the Surveillance staff, an outside consultant, and
may include a corporate and operating company environmental profes-
sional. The Director of the Surveillance Program and the consultant
routinely report on the status of the program to Allied's Board of
Directors.
BACKGROUND
Over the past few years Allied Corporation has changed not only
its name (from Allied Chemical Corporation) but also the breadth and
focus of its operations (from a multi-million dollar chemical company to a
multi-billion dollar diversified corporation—of which chemicals represent
only 20% of total sales).
The corporation, with about 400 North American manufacturing
facilities and 120,000 employees, is organized into five sectors: Chem-
icals, Oil and Gas, Automotive, Aerospace, and Industrial and Tech-
nology (diversified manufacturing operations).
33
Arthur D. Little, Inc.
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The Corporate Health, Safety, and Environmental Sciences Depart-
ment is headed by a Vice President who reports to the Senior Vice
President, Corporate Technology. The department has 34 full-time staff
organized into the following major disciplines:
• Pollution Control—responsible for air pollution control, water
pollution control, solid and hazardous waste disposal, water
supply and spill prevention;
• Product Safety—responsible for product safety and product
quality programs;
• Occupational Health—responsible for industrial hygiene;
• Medical Sciences—responsible for employee medical programs;
• Safety and Loss Prevention—responsible for worker safety
and prevention of property losses; and
• Environmental Surveillance—responsible for the environmental
auditing function.
These functions are supported by a toxicology laboratory staffed
by 44 scientists and support personnel.
Each of the above groups is headed by a director and staffed with
experienced professionals. The responsibilities of this corporate
department are overall coordination of and guidance to the sectors and
operating companies, program monitoring, and regulatory affairs inter-
action .
Each sector has environmental, health, and safety staff (struc-
tured similarly to that of the corporate staff) with day-to-day respon-
sibilities for health, safety, and environmental compliance in their
sector. Each group is headed by a director who reports at a high level
within the sector organization. A dotted-line reporting relationship
exists with corporate counterparts. Staff assigned to specific facilities
report to facility management but have a dotted-line reporting relation-
ship to sector health, safety, and environmental counterparts.
Figure 1 depicts Allied's health, safety, and environmental organization.
PROGRAM PURPOSE
The objective of the Allied Corporation's Health, Safety & Environ-
mental Surveillance Program is to provide independent verification that:
• The Corporation's operations are in compliance with the law
and with corporate policies and procedures; and
• Systems are in place to insure continued compliance.
34
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FIGURE 1
ALLIED CORPORATION'S HEALTH, SAFETY, AND ENVIRONMENTAL ORGANIZATION
~i
P
c
Chief
Executive
Officer
Senior VP
Corporate
Technology
OJ
U1
Sector
President
Vl« Prcaldent
Health, Safety »
Environmental Sctencea
Sector VP,
Operation!
CVtw|>any
I'resident
Health, Safety &
Environmental
Surveillance
Sector Director,
Health, Safety &
Envdonuwntal Science*
Kail Illy
MdlldgV!
-------
Allied Corporation has a formal corporate health, safety & environ-
mental policy issued by the Chairman and Chief Executive Officer. The
policy states that the corporation will establish and maintain programs
to assure that applicable laws and regulations are known and obeyed,
and will adopt its own standards where laws and regulations may not be
adequately protective and where laws do not exist. There are also
written corporate guidelines for each discipline (e.g., pollution control,
safety, and health). For example, a Guidelines Manual has been pre-
pared by Corporate Health, Safety, and Environmental Sciences Depart-
ment and issued to all operating managers and facilities. This manual
details the guidelines and practices necessary to comply with environ-
mental regulations and corporate policies.
Sectors, companies, and individual facilities have developed their
own written operating procedures to supplement the corporate guide-
lines. These procedures address environmental concerns specific to the
individual businesses.
ORGANIZATION AND STAFFING
Allied's Surveillance Program is housed in the Corporate Health,
Safety & Environmental Affairs Department. The terms "surveillance"
or "review" are used by Allied in preference to "audit" to avoid pos-
sible confusion with financial audits. Financial auditing has had rules,
regulations, and generally accepted standards of practice in place for
years; environmental surveillance is an evolving discipline and, as
such, rules, systems, and standards do not yet exist.
A number of criteria were established when Allied considered an
approach to organizing and staffing the Health, Safety and Environ-
mental Surveillance Program including:
• Independence of the audit teams from those responsible for
managing corporate and sector environmental programs—yet
organizationally located where communication and resolution of
problems and conflicts would be most efficient.
• Minimizing the full-time manpower commitment to the Surveil-
lance Program—yet having a readily available supply of
competent, objective team members, continuity in the conduct
of reviews, and long-term accountability for the program.
With those criteria, several options were considered (such as using
external auditors; establishing an independent internal group housed
within the Corporate Audit Department or the Corporate Health, Safety
& Environmental Sciences Department; or using task forces made up of
persons drawn from throughout the corporation). Each option was
viewed by Allied as having advantages and disadvantages. For
example:
• An external auditor would not require the addition of any
full-time employees, and would have a high degree of
independence—yet would involve relatively higher total costs.
Additionally, there could be substantial barriers to coordina-
tion and communication.
Arthur D. Little, Inc. 3 6
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• An independent group within the Corporate Audit Department
would have a high degree of independence from health,
safety, and environmental program management—but would not
have the needed perspective.
• A separate, independent group of full-time auditors within the
Corporate Health, Safety & Environmental Department would
afford a good opportunity for communication with health,
safety, and environmental management—but their indepen-
dence might be questioned.
• A task force would have broad participation and high flexi-
bility in terms of level of effort and relatively low cost—but
carry a potential for loss of continuity and disruption of
regular functions.
In order to achieve the best mix of the qualities in the options
above, a composite approach was adopted. The Health, Safety & Envi-
ronmental Surveillance Program was established within the Corporate
Health, Safety & Environmental Sciences Department and is staffed by
three full-time professionals. To ensure continuity and accountability,
the team leader for each audit is one of the three full-time surveillance
professionals. The remainder of the audit team (which varies from
three to six people depending on the review scope and size of facility)
is comprised of corporate and sector health, safety, and environmental
professionals familiar with the review subject but not directly involved
in the programs being reviewed; and an outside consultant (which
provides the advantages of an external auditor).
An audit typically takes three to four days. The current yearly
budget for the program is $460,000.
The Director, Health, Safety & Environmental Surveillance, along
with the outside consultant, routinely report to the Board of Directors
two to four times a year on the status of the Surveillance Program.
AUDIT SCOPE AND FOCUS
All of Allied's United States and Canadian manufacturing facilities
are within the scope of the Surveillance Program—with operations
assessed as having lower health, safety, and environmental risk receiv-
ing less attention than those assessed as high-risk operations. The
functional scope of the program includes:
Air Pollution Control
Water Pollution Control and Spill Prevention
Drinking Water Supply
Solid and Hazardous Waste Disposal
Occupational Health
Medical Programs
Safety and Loss Prevention
Product Safety
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Arthur D. Little, Inc.
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The compliance scope includes all federal, state (or provincial),
and local environmental regulations; corporate policies and procedures;
and "good health, safety, and environmental practices."
With approximately 400 locations and eight functional scopes, a
comprehensive review of all subjects at all locations would be a formid-
able task. Thus, most audits are limited to only one of the functional
areas listed above (e.g., air pollution control only) in order to maxi-
mize the amount of in-depth review in the time available. (Occupational
Health and Medical Programs audits are conducted simultaneously but
with separate audit teams; Drinking Water Supply audits are typically
combined with another functional area.) Thus, while the program
covers a variety of topics, the scope of a specific audit is narrow.
AUDIT TIMING AND FREQUENCY
Thirty-six audits were conducted in 1983 and 48 are planned for
1984. The Surveillance Program reviews only a relatively small sample
of the Corporation's facilities each year. Review locations are chosen to
represent a cross section of Allied business interests and health,
safety, and environmental concerns where the potential environmental
risk is high. Corporate environmental staff, the Director of Surveil-
lance, and the external auditor annually develop a sample of facilities to
be audited that includes facilities from each of the operating companies
and major business areas. Facilities are selected on a random sample
basis through a process that reflects their assessed environmental risk.
Audits are apportioned evenly among the various functional areas.
At the beginning of each year, the audit schedule for the year is
sent out to the sector presidents and corporate and sector health,
safety, and environmental staff. One month prior to the review, the
Director, Health, Safety & Environmental Surveillance, sends a letter to
the facility manager with copies to the sector environmental staff and
the appropriate corporate health, safety and environmental staff
(depending on the scope of the audit).
AUDIT METHODOLOGY
The Health, Safety & Environmental Surveillance Program's compre-
hensive, in-depth audit employs a number of techniques such as formal
internal control questionnaires, formal audit protocols (or guides),
informal interviews with facility personnel, physical observations, docu-
mentation review, and verification.
A written audit protocol, which has been prepared for each func-
tional area of the review, reflects the objectives of the audit, facility
characteristics, and time constraints. The protocol methodically guides
the auditor to an understanding of the management system through the
conduct of specific tests that either confirm the system is working or
determine any specific deficiencies. Each auditor carefully documents
the accomplishment and results of each review step in the audit protocol
in his or her audit working papers.
38
/Tv Arthur O I ittlp Inr
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The basic phases in Allied's audit process (illustrated in Exhibit 1)
include:
Phase I: Preparation
Among the pre-audit activities conducted by the audit team leader
(full-time surveillance professional) are the confirmation of review dates
and organization of the audit team based on the functional scope of the
review. One month in advance of the audit, the team leader notifies
the facility manager, in writing, of the specific dates and review scope.
One week prior to the review, the team leader telephones the facility
manager to again confirm the audit. Corporate files are screened to
obtain and review information on the facility and its processes (e.g.,
process flow diagrams, plant layout diagrams, policies and procedures,
operating manuals, permits, etc). Regulations applicable to the facility
are also obtained.
Phase II: On-Site Review
The on-site review commences with a meeting of the audit team,
the facility manager, and appropriate facility personnel. During this
meeting, the audit team leader discusses the objectives of the Surveil-
lance Program and the review scope. This is followed by the facility
personnel presenting an overview of the facility's operations—products,
processes, facility organization, etc. The review team then tours the
facility, with a member of the facility environmental staff, to gain a
general understanding of facility characteristics.
Following the tour, the review team and appropriate facility envi-
ronmental staff meet to complete the Internal Controls Questionnaire.
This questionnaire, administered by the audit team leader, aids the
auditors in developing an initial understanding of facility operations,
processes, personnel responsibilities, and environmental management
controls. (Exhibit 2 presents a portion of Allied's Water Pollution
Control Internal Controls Questionnaire.)
Working from the audit protocol, with major sections divided among
the audit team members, each team member gathers system information
and performs tests on those systems. In the course of the review, the
auditor must use sampling techniques and exercise professional judgment
in selecting the type and size of samples to be used to verify that the
key controls in the control system under review are in place and work-
ing. No testing may be done until the system is well understood and a
carefully reasoned plan of testing is worked out. Such understanding
may come from interviews with facility staff, review of facility operating
procedures and systems, etc. (Exhibit 3 provides a portion of a Water
Pollution Control Protocol.)
Testing of the systems in place can take a variety of forms. For
example, verification testing for water pollution control can include:
• Visual observation downstream from an outfall;
• Comparison of strip charts and discharge monitoring reports;
39
/L. Arthur D. Little, Inc.
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EXHIBIT 1
BASIC PHASES IN ALLIED'S AUDIT PROCESS
CORPORATE HEALTH, SAFETY. AND ENVIRONMENTAL SURVEILLANCE REVIEW SYSTEM
MAS! 11
On-Slt« Rrri«»
fHASI 111
Reporting and
lacord Preaerration
PHASE IV
Company Action
Schedule
X(TM» Dale
Organize
Review Team
Arrange
Trar» PUna
Confine Vialt
with Plant Manager
Letter: 1 aonth pnor
Phone: 1 nek prior
Servcn nit
Infonuition
Obtain Ptrunent
ReguUtions
Tnv«I
to Sit*
40
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EXHIBIT 2
EXAMPLE OF A PORTION OF AN INTERNAL CONTROL QUESTIONNAIRE
REVIEW OF INTERNAL CONTROLS
WATER POLLUTION CONTROL
QUESTIONNAIRE
1. Is any plant wastewater (Including contaminated
surface water run-off) disposed of as follows:
a. Untreated wastewater discharge to surface
waters.
b. Treated wastewater discharge to surface
waters.
c. Deep well injection.
d. Ocean dumping.
e. On-site disposal.
f. Discharge to POTW.
g. Disposal in a manner not covered in a-f.
2. Have applications for approval of the above plant
activities been filed with the appropriate
authorities in compliance with state, federal,
and local requirements?
3. Have required permits been received?
4. Has the location complied with all the terms,
conditions, requirements, and schedules of
compliance of required permits?
5. Is the location on a compliance schedule
pursuant to regulatory requirements?
a. Were the interim and final requirement
dates met?
b. Were required reports submitted in a
timely fashion?
6. Have any of the following changes which would
result in new or increased discharges of
pollutants, been properly reported to the
appropriate agency:
a. Facility expansion?
b. Production increase?
c. Process modifications?
7. Have the location's existing permits ever
been modified, suspended, or revoked by the
regulatory agency in whole or in part during
its term for any cause?
8. Has the location filed the appropriate renewal
documents in a timely manner prior to
expiration of all permits?
9. a. Are all federal, state, and local permit
parameters being monitored as prescribed
in the permit?
b. Is additional monitoring performed?
c. Is there a calibration and preventive
maintenance program for monitoring
equipment?
Yes No N/A
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Arthur D. Little, Inc.
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EXHIBIT 3
EXAMPLE OF A PORTION OF A WATER POLLUTION CONTROL PROTOCOL
- 3 -
7.b. Permits
1. Prepare a schedule listing permit
requirements currently in effect.
2. Review compliance with all permit
stipulations (exclusive of
effluent limitations.)
3. Review intra-company corres-
pondence relative to permit
limitation issues, note
unresolved issues.
4. Prepare a schedule of compliance
orders issued during the life of
the permit.
5. Review compliance with the
stipulations of all compliance
orders.
Compliance Monitoring & Reporting
8. Based on the flowchart or narrative pre-
pared in Step 5b, confirm you understanding
of the system by performing the following:
a. System Review
Observe a complete sampling and testing
process through to recording results in
laboratory notebooks. Follow paper flow
to applicable records, memos and reports.
Note differences between plant procedures
and Permit/Allied procedures.
b. Test of Transactions
1. Prepare (using independent records
where available) a schedule of all
excursions beyond permit limits
during the review period.
2. For all excursions in above schedule
determine that:
a. Internal notification was per
your understanding of the system.
b. Regulatory agencies were
promptly and accurately informed.
c. Corrective action was taken.
c. Functional Testing
1. For a representative sample of months
within the review period, review the
basic compliance periods noted in these
records.
2. Compare the schedule with the schedule
•Dreoared in 8b.l.
Comments
W.P. Ref
. Arthur D. Little, Inc.
42
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• Review of programs to assure the reliability of treatment or
monitoring equipment; and
• Determination that composite samplers, effluent flow measuring
devices, and in-place monitoring devices are properly main-
tained and calibrated.
Each auditor carefully documents his or her testing plan and the
results of each test. Each auditor shares his or her observations and
information on deficiencies found throughout the audit. Also, time is
set aside at the end of each day to exchange information on the system
and share any concerns about its effectiveness. The audit team is
instructed to continuously feed back any impressions being formed
about the system's compliance with established criteria. This contin-
uous feedback is intended to: eliminate misconceptions and false trails
for the team member who may have misunderstood what he or she was
originally told; encourage the team members to organize their thoughts;
and give facility personnel an opportunity to participate in the audit
process.
Significant findings are listed by each audit team member and are
organized by the team leader on a summary sheet form for discussion
with facility management. The on-site audit concludes with a close-out
meeting between the audit team and facility management. Each receives
copies of the audit findings summary form and each finding is dis-
cussed.
Phase III: Reporting and Record Preservation
Report Format
The purpose of the written report is to provide information to top
management (sector presidents) on the more significant findings of the
audit. The overall thrust of the written report is an opinion as to
whether or not the facility is in substantive compliance followed by a
list of exceptions noted. The report is based on findings listed on the
audit findings summary form. Findings related to regulatory standards
are qualified with a statement that they have not received a detailed
legal review.
A standardized format for the written report has been established
which consists of four parts. Section I is the who, what, where, why
information. The next two sections include all significant instances of
non-compliance with:
• Regulatory Standards (Federal, state/provincial, and local);
and
• Allied Corporation's Policies and Procedures (corporate,
sector, or facility).
43
Arthur D. Little, Inc.
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The final section includes any significant deficiencies in the facility
control systems which would make continued compliance with the law or
company policy questionable (such as record retention, documentation,
clear assignment of environmental responsibilities, etc.)
The length of the report depends on the number of findings;
typically it is four to five pages long. An example of Allied's sur-
veillance report is presented in Exhibit 4.
Report Distribution
The written audit report is addressed to the sector president
responsible for the audited facility. The report is issued in draft form
(by the team leader) with copies to the involved line and staff per-
sonnel from both the operating company and corporate, the facility
manager, the Law Department, and the audit team. Comments on this
draft report are requested within two weeks of its issuance. When
comments necessitate significant revision of the first draft, a second
draft of the report may be prepared and circulated for review.
A final written report is issued to the sector president approxi-
mately one month after the review, with copies to the Legal Department,
Vice President, Health, Safety & Environmental Affairs, corporate
environmental functional specialists, business area management, facility
manager, and the review team. The final report is accompanied with a
request that the operating company respond in writing to the final
report with an action plan for correcting the deficiencies noted.
Records Retention
Allied has established a formal records retention policy which wns
developed to help keep the records volume at a manageable level and to
ensure that all records relating to surveillance reviews are retained for
a period of time consistent with their utility in the program and with
applicable federal regulations. Thus, audit working papers are retained
until the audit is repeated or ten years (50 years where subject to the
Resource Conservation and Recovery Act (RCRA) or Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA)
records retention requirements). Audit reports are retained for ten
years (50 years where subject to RCRA or CERCLA records retention
requirements).
Other Reporting
In addition to the formal written report on each individual review
to the sector president:
• The Board Corporate Responsibility Committee receives regu-
lar reports on the Surveillance Program activities two to four
times a year. The Director of Surveillance attends the meet-
ings of the Board Committee and supplements the written
report with an oral report and responds to any questions the
Board members may have. Also attending the Board meeting
44
/ti Arthur D. Little, Inc.
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EXHIBIT 4
EXAMPLE OF ALLIED'S AUDIT REPORT
LLIED
Corporation
Memorandum
March 3, 1983
Mr.
Sector
President
SUBJECT: Environmental Surveillance Review - Hypothetical Plant
Enclosed is a report summarizing the findings of our review of Water
Pollution Control & Spill Prevention programs at the Hypothetical Plant
February 27 through 30, 1983.
It is suggested that the Company respond in writing to the report
indicating action anticipated in response to each finding. Please provide
me with a copy of the action plan.
Director, Surveillance
Corporate Health, Safety,
and Environmental Sciences
cc: VP Corporate Health, Safety & Environmental Sciences
Consultant Project Leader
Associate General Counsel
Plant Manager
Director, Environmental Affairs, Operating Division
Business Area Manager/Director
Director Corporate Pollution Control Department
Director Operating Division Pollution Control Department
This hypothetical report was prepared for purposes of illustration and
format. Findings contained herein do not necessarily reflect actual
conditions.
45
Arthur D. Little, Inc.
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EXHIBIT 4 (CONTINUED)
HYPOTHETICAL PLANT*
OPERATING DIVISION
WATER POLLUTION CONTROL AND SPILL PREVENTION
I. Background;
A. Purpose:
The review was performed as a part of a series of reviews
conducted at selected locations in 1983 by environmental
surveillance teams to provide the management of the Corporation
with verification that environmental programs are conducted in
compliance with Allied Corporation Policy and procedures and
federal, state, and local laws.
B. Review Scope:
The review scope was limited to the conduct of the location's
Water Pollution Control and Spill Prevention programs during the
period January 1, 1982 through February 30, 1983.
C. Conduct of the Review;
The review was conducted on February 27 through 30, 1983 by a
team composed of and , Corporate Health,
Safety and. Environmental Sciences"] and "^^ , ,
Inc. The team leader was . ,
Operating Division Water Pollution ControlManager was present
during the review.
D. Report Scope;
The purpose of this report is to communicate all deficiencies
noted in the course of the review which in our opinion may have
substantial significance to management. Other less significant
deficiencies have been discussed with plant and company
representatives. All deficiencies are documented in the review
working papers and have been discussed with , Plant
Manager.
Findings related to regulatory standards are based on our
understanding of the standards and their application to the
Hypothetical Plant during the review period. They have not
received a detailed legal review.
This hypothetical report was prepared for purposes of illustration and
format. Findings contained herein do not necessarily reflect actual
conditions.
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EXHIBIT 4 (CONTINUED)
Hypothetical Plant* - Operating Division
Water Pollution Control and Spill Prevention
II. Verification - Regulatory Standards
A. Findings;
On the basis of our review, we believe that the Water Pollution
Control and Spill Prevention programs at the location comply
with federal, state, and local regulations except as follows:
b. Exceptions:
1. Administrative procedures for spill prevention have not
been fully implemented as follows:
a. Oil storage tanks are not subject to periodic
integrity testing.
b. The Quench Oil storage tank loading valve is not
locked when in non-operating status.
c. The plant practice of opening the Hazardous Waste
Storage Area drain valve during precipitation events
results in unsupervised drainage.
2. In our tour of the North plant, we noted five stormwater
discharge points along the east fenceline. A determination
has not been made as to whether they met the statuatory
definition of "point source discharges."
III. Verification - Allied Corporation Policy & Procedures
A. Findings:
With the exception of findings noted in Section II and the
following, the review did not reveal any significant departure
from the provisions of Corporate Policy or Corporate, Company,
or Plant procedures.
B. Exceptions;
Comprehensive procedures for prevention, reporting and clean-up
of chemical spills have not been developed for the South Plant.
This hypothetical report was prepared for purposes of illustration and
format. Findings contained herein do not necessarily reflect actual
conditions.
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EXHIBIT 4 (CONTINUED)
Hypothetical Plant* - Operating Division
Water Pollution Control and Spill Prevention
IV. Control System Observations;
A. Observations;
Our review did not reveal any significant deficiencies in plant
control systems which were not summarized in Sections II & III
except as follows:
B. Exceptions:
1. We found procedures for instrument calibration and
recordkeeping to be informal at the West Plant waste
treatment facility.
2. Monitoring activities to detect off-site transport of
waters influenced by leakage from a former plating
operation do not include monitoring of a storm drain on the
southwest corner of the site. Results of a 1981
hydrogeological study suggest that transport, if any, would
trend toward the storm drain.
Review Team Leader
This hypothetical report was prepared for purposes of illustration and
format. Findings contained herein do not necessarily reflect actual
conditions.
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is a representative from the Surveillance Department's outside
consulting firm. The purpose of reporting to the Board is to
confirm that the Surveillance Program is functioning and to
provide comfort that no material deficiencies have been noted.
• Sector presidents receive an annual oral summary on all
audits conducted at locations for which they are responsible.
• Environmental and line managers receive copies of the formal
report on each audit and informal communication by the
Director of Surveillance on specific issues.
Phase IV; Company Action
The job of the audit team ends with the submission and manage-
ment's understanding of the surveillance report. The review process,
however, continues until those responsible for correcting any deficien-
cies noted have prepared an action plan for correcting the deficiencies.
The action plan is developed by the facility personnel and sent to
the business area manager and the sector health, safety & environ-
mental director. The latter provides a copy of the action plan to the
Surveillance Director and other managers of concern. The Surveillance
Director receives the action plan for information only—to confirm that
the final report has been understood, that the response is consistent
with the findings of the report, and that action is taken to provide
results within a reasonable time. "Reasonable" is determined by the
significance of the findings. (That is, a response to a violation of
regulations should be timely and in accordance with regulatory require-
ments; actions on deviations from policies and procedures are dependent
upon the severity of the finding.)
Action plans are typically received within two months of the issu-
ance of the final written report. The plan reports on corrective actions
already taken, as well as those that are planned. Operating manage-
ment then assumes responsibility for follow-up and monitoring of the
corrective actions.
The Corporation's environmental assurance system includes formal
procedures for follow-up and corrective action on all environmental,
health, and safety deficiencies. A recognition of this commitment is
evidenced by the Environmental Assurance Letter which is prepared
annually by the sector presidents and submitted to Allied's Chairman
and Chief Executive Officer. The letter indicates the state of compli-
ance with Allied's Health, Safety and Environmental Policy. The objec-
tive of the letter is to assure that: (1) appropriate health, safety, and
environmental systems are in place and functioning; (2) these systems
recognize substantial (actual or potential) deficiencies that may exist;
(3) such deficiencies are reported up to the necessary level of corpo-
rate and sector managements; and (4) appropriate action plans are
developed and timely corrective actions taken. The Assurance Letters
are reviewed annually at a meeting of the Corporate Responsibility
Committee of the Board of Directors.
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ASSURING FOR QUALITY
There are a number of ways in which Allied ensures audit quality.
First, a member of the Surveillance staff participates on each audit as
team leader. The team leader's role includes making sure there is good
communication among the team members. This is generally done by-
setting aside a block of time at the end of each day of the audit for the
auditors to exchange information and share concerns.
Second, Allied's audit protocols provide a structured framework
which guides the auditors through a series of steps designed to under-
stand the system under review, conduct appropriate tests to confirm
that the system is working, and determine specific deficiencies.
A third quality control measure relates to the audit working
papers. The credibility of the audit depends on how well each auditor
documents what he/she has done and the conclusions reached. Each
team member must prepare working papers which document the informa-
tion gathered in completing the protocol. At the end of each audit, the
team leader reviews, initials, and dates each page of the working
papers. The working papers serve as support for the audit report and
a way of evaluating the audit and the performance of each team
member.
Finally, Allied's outside consultant provides an additional quality
control check. A representative of the consulting firm participates on
each review. All audit reports are reviewed by the consultant to
ensure accurate and consistent audit reporting.
PROGRAM BENEFITS AND DEVELOPMENTS
Allied's Director of Health, Safety & Environmental Surveillance
sees a number of benefits throughout the corporation resulting from the
Surveillance Program. Among them are the following:
• For top management and the Board of Directors, the program
provides independent verification that operations are in
compliance with applicable requirements of environmental law
and the corporation's environmental policy.
• For environmental management, the program serves as another
source of information on the status of operations, and infor-
mation on both individual deficiencies and patterns of defi-
ciencies that may occur.
• For line management, there is added incentive for much closer
self-evaluation to confirm that their operations are in com-
pliance. The program has also stimulated line management to
become more familiar with the detailed implications of envi-
ronmental requirements. The program has identified problems
in their operations that require corrective action, or (more
frequently) it has confirmed that environmental requirements
were being met.
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Current developments in AUied's audit program are oriented toward
improving the efficiency and effectiveness of the program. For exam-
ple, the technical scope of the program has been broadened to include
Good Laboratory Practices; the Drinking Water Supply area has been
recently added; and the Product Safety Audits have been expanded to
include quality assurance issues. The audit protocols have undergone
minor changes to more effectively guide the auditors in their review,
and site selection approaches are being revised and modified to respond
to the changing nature of the corporation.
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IV. POLAROID CORPORATION'S ENVIRONMENTAL
AUDIT PROGRAM
Polaroid Corporation's Environmental Audit Program was developed
in 1980 as a way to help motivate the company's divisions and facilities
in fulfilling their environmental goals and responsibilities. Several
years earlier Polaroid had established a safety audit program. Based
on the success of the safety audit program, Polaroid's Health, Safety,
and Environmental Affairs Steering Committee (composed of top corpo-
rate officers') supported the goal of establishing a similar program in
the environmental area.
In 1981 written environmental audit procedures were developed and
a prototype audit was conducted at a new chemical facility. The suc-
cess of this first audit and the cooperation of the facility being audited
led Polaroid to implement the audit program throughout the company.
Polaroid's environmental audit program is managed by the Corpo-
rate Manager of Environmental Programs and draws on many environ-
mental professionals working throughout the company.
BACKGROUND
Polaroid designs, manufactures, and markets a variety of photo-
graphic products. These include instant photographic cameras and
films, light polarizing filters and lenses, and diversified chemical,
optical, and commercial products. Polaroid's 1982 net sales totaled $1.3
billion.
Polaroid's environmental organization is depicted in Figure 1. The
Corporate Health, Safety, and Environmental Affairs Department is
headed by a corporate director. This director reports to an Executive
Vice President. The Department has three major groups:
• Environment (air, water, solid and hazardous waste activities,
and the environmental auditing function);
• Industrial Hygiene; and
• Safety (fire protection and chemical hazard activities and the
safety auditing function).
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FIGURE 1
POLAROID'S ENVIRONMENTAL ORGANIZATION
Chief
Operating
Officer
Executive
Vice
President
Division
Management
Reporting
Director, Health
Safety & Environ-
mental Affairs
Chemical
Information
and Control
Manager,
Environmental
Programs
Manager,
Safety
Programs
Manager,
Industrial
Hygiene
Programs
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In addition, there are a Toxic Substances Control Act manager, an
information scientist, and a consulting toxicologist, each of whom
reports to the Corporate Director of Health, Safety, and Environmental
Affairs. The Corporate Department acts in an oversight, consultative
role to the divisions and facilities by working with all the health, safety
and environmental professionals throughout the company in setting;
goals, reviewing performance, and implementing regulatory require-
ments.
Within Polaroid's 15 operating divisions, there are approximately 40
people with responsibilities for health, safety, and environmental affairs
reporting to division management. Typically, one to two people within
each division have such responsibility (depending on the division size
and type of operation). The division environmental function is an
extension of the corporate group and has day-to-day responsibility for
environmental compliance.
PROGRAM PURPOSE
The goal of Polaroid's environmental audit program is to efficiently
measure and evaluate environmental performance and compliance and to
help ensure that the company meets its environmental responsibilities.
The audit is based on compliance with existing environmental regula-
tions, Polaroid standards, and "good environmental practices."
The program provides:
• Information to the divisions and sites on areas of good envi-
ronmental performance as well as those areas needing
improvement;
• Recommendations to correct any deficiencies noted.
Polaroid has a written corporate environmental policy statement. It
also has evolving environmental instructions prepared by the various
environmental personnel and approved by the Corporate Manager of
Environmental Programs.
ORGANIZATION AND STAFFING
Polaroid's environmental audit program is managed by the Corpo-
rate Manager, Environmental Programs. The Audit Committee (audit
team) is selected from among the environmental professionals assigned to
the various divisions and sites. These professionals work either full-
time on environmental, health, and/or safety issues or part-time (with a
working knowledge of environmental activities).
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Audit Committee members and the audit chairperson are selected by
the Corporate Environmental Manager for each audit based on their area
of expertise and previous knowledge of the site. They must be
independent from the area to be audited; that is, the auditors cannot
audit their own facility. The Committee for each audit is typically four
people. Most members have degrees in chemical engineering, civil engi-
neering, or environmental engineering. All have had training in envi-
ronmental regulations.
Another key person on each audit is the audit host. This person
is the environmental coordinator at either the division or the facility
being audited. He or she acts as the "host" to the Audit Committee
during the audit and gathers the necessary documentation and identifies
the appropriate site personnel for the auditors. The host, however, is
not a member of the audit team.
Polaroid's environmental audit program does not have a separate
budget. Each auditor's time and expenses are paid for by his/her own
division.
AUDIT SCOPE AND FOCUS
The scope of Polaroid's corporate environmental audit program
includes federal, state, and local environmental regulations, and corpo-
rate, division, and facility environmental policies and procedures. At
the present time only U.S. operations that may have an impact on the
environment are included. Overseas plants are included in the Corpo-
rate Safety Audit Program which also deals with some environmental
issues.
All audits include the following nine sections:
Environmental permit requirements
Hazardous/chemical substances management
Surface water/ground water protection
Hazardous/chemical waste disposal
Solid waste disposal
Wastewater management
Air emission management
Material balance
Conservation (energy, water, or other materials)
AUDIT TIMING AND FREQUENCY
The schedule of sites to be audited is prepared by the Corporate
Environmental Manager at the beginning of each year. The Chairperson
(audit team leader) of each audit picks the specific dates and notifies
the site, typically one month in advance of the audit, by letter.
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Audit site selection is based on the potential hazards at the site
and its type of operations. One audit can include only one building
(which can house several divisions), or several buildings (which can be
under one division). Thus, the audit program has a geographical as
well as an organizational focus. Three audits were conducted in 1982
and nine in 1983.
Typical audit duration is three days. Each audit generally reviews
the status of the location during the 12-24 months immediately preceding
the audit.
AUDIT METHODOLOGY
Polaroid's environmental auditors employ two primary techniques—
documentation review and physical observation. Checklists are used for
each of the nine audit sections and the auditors work from these check-
lists to perform and document the audit. Each checklist states the
objectives of the audit within that particular area, lists the documen-
tation requirements, and includes questions applicable to the particular
area under review. Informal interviews are also conducted with site
personnel.
The key phases in Polaroid's audit process include:
Phase I: Audit Preparation
The Corporate Environmental Manager selects the Audit Committee
and appoints the Committee Chairperson. One month prior to the audit
the Corporate Environmental Manager sends a letter to the Division
Manager. The letter states the purpose of the audit program, the site
selected for audit, and the dates of the audit. The audit checklists are
included with the letter. Working from the checklists, the audit host
and site personnel gather the necessary documentation for the auditors.
This documentation must be brought to the audit kick-off meeting. If
the documentation is not brought, the team notes it during their audit
reporting process.
Each auditor, based on his or her expertise, chooses specific
sections of the audit to be responsible for (e.g., permits, solid waste
disposal etc.). The Audit Chairperson ensures that all audit areas are
covered.
Phase II: Audit Kick-Off Meeting
The audit commences with a meeting between the Audit Committee
and division/site personnel. During this meeting, the auditors discuss
what the audit will entail, answer any questions site personnel may
have, and are provided with site documents and records. Such records
normally include:
• Permits
• Site inspection procedures
• Inventory of hazardous/toxic substances
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Material Safety Data Sheets
Site hydrological map
Contingency and Spill Prevention Control and Countermeasure
plans
Hazardous waste shipping program records and procedures
Information on hazardous waste vendor inspection
Process flow diagrams
Wastewater sampling and analysis data
Site plan with air emission sources and pollution control
equipment identified
Smoke density recorder charts for all applicable boilers
Stack/vent testing data and results of air sampling programs
Phase III: On-Site Audit
The auditors review the documents listed above focusing on the
accuracy, appropriateness, and timeliness of each. Following this docu-
mentation review, the auditors tour the site—inspecting roof tops for
visible emissions, soil around the site for evidence of spills, solvent
traps, etc. The auditors work from the audit checklists while gath-
ering data; the checklists form the documentation of the audit.
As an example of Polaroid's audit process for the hazardous/chem-
ical substances area, the auditors follow the checklist (see Exhibit 1)
and perform the following tasks:
1. Review the documentation requirements such as the Chemical
Inventory for the site and the Safety Data Sheets for each
substance. This review focuses on the accuracy and com-
pleteness of each document.
2. Complete each item in the checklist (Section II of Exhibit 1)
by:
a. Reviewing the documentation for special handling pro-
cedures for the substances at the plant, and inter-
viewing plant personnel regarding such procedures.
b. Interviewing the plant material control personnel to
determine what inventory controls are in place. The
auditors follow this interview with a tour of the plant
warehouse to determine whether the policies and pro-
cedures to control inventory are followed.
c. Interviewing plant personnel to determine whether they
are informed of the hazards and know of the safety
procedures for the substances in the plant's chemical
inventory.
d. Touring the plant and observing raw materials containers
to determine whether they are adequately labeled.
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EXHIBIT 1
HAZARDOUS/CHEMICAL SUBSTANCES AUDIT CHECKLIST
-4-
2.0 HAZARDOUS/CHEMICAL SUBSTANCES
Objectives: To determine what hazardous/chemical substances are being used,
and if special procedures are necessary for their handling and
use, including inventory controls.
I. DOCUMENTATION REQUIREMENTS
A. LIST ALL IMPORTANT HAZARDOUS/TOXIC SUBSTANCES USED IN THIS BUILD-
ING(S) SITE.
B. INCLUDE SAFETY DATA SHEET FOR EACH SUBSTANCE.
II. CHECKLIST.
A. DO SPECIAL PROCEDURES EXIST FOR HANDLING ALL THE ABOVE SUBSTANCES?
B. ARE INVENTORY CONTROLS ADEQUATE?
C. ARE ALL PLANT EMPLOYEES INFORMED CONCERNING THESE SUBSTANCES?
D. ARE ALL RAW MATERIALS CONTAINERS ACCURATELY LABELED?
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EXHIBIT 1 (continued)
-5-
E. ARE WAS1E DISPOSAL PROCEDURES FOLLOWED?
(See Hazardous Waste Disposal, Sec. 4.0)
F. ARE APPROPRIATE INDIVIDUALS AWARE OF SPECIAL SPILL PROCEDURES?
G. DO THESE SUBSTANCES DISCHARGE TO THE:
Air (See Air Emissions Sec. 7.0)
Waste Water (See Wastewater Emis. Sec. 6.0)
Surface Water (See Surface Water, Sec. 3.0)
H. ARE MEASURES IN EFFECT TO PREVENT RUBBISH/TRASH CONTAMINATION?
(See Solid Waste Disposal, Sec. 5.0)
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e. Determining whether waste disposal procedures are
followed. First the auditors obtain the plant's disposal
procedure. Then through physical observation and
discussions with plant personnel, they determine whether
those procedures are followed.
f. Determining whether the appropriate individuals are
aware of special spill procedures by reviewing the
plant's Spill Prevention Control and Countermeasure
(SPCC) plan and interviewing the appropriate plant
personnel about their knowledge of the plan and any
special procedures contained therein.
g. Determining whether there are any uncontrolled dis-
charges from the plant, by observing roof tops and
touring the plant's perimeter to look at sewers and
sumps.
h. Determining whether measures are in effect to prevent
rubbish/trash contamination. This is done by reviewing
local procedures and practices, looking in dumpsters,
and talking to appropriate plant personnel.
During each of the above steps, the auditors work from the check-
lists to record their notes and observations.
Phase IV: Audit Close-Out
At the conclusion of the on-site audit, the Audit Committee holds a
one- to two-hour close-out meeting with division/site personnel and
orally report on the findings of the audit.
ASSURING AUDIT QUALITY
Polaroid has a number of ways to ensure consistency and quality
from audit to audit. For example, all audits are conducted by experi-
enced environmental professionals who are selected by the Corporate
Environmental Manager for each audit. Additionally, the Corporate
Environmental Manager reviews each audit report and participates in
both the audit scoring and final audit meeting (discussed below) to
ensure consistency in the reporting and scoring aspects of the audit.
Finally, the Corporate Environmental Manager conducts training sessions
for Polaroid's environmental professionals to help keep them thoroughly
familiar and abreast of environmental regulations.
AUDIT REPORTING
Polaroid prepares a written report of each audit. The purpose of
Polaroid's audit report is to highlight those environmental activities at
the plant that need improvement. Any unique or very good environ-
mental practices are also noted. Recommendations are given for each
deficiency identified whenever possible.
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Reporting Process
1. Preparation
Once back in his or her own office, each auditor takes the check-
lists from which information has been gathered and writes the sections
of the report for which he/she is responsible. The Audit Chairperson
collects each section and consolidates them into a draft audit report
within four to eight weeks of the audit. This draft is then circulated
to the Audit Committee, the Corporate Environmental Manager, and the
audit host for review and comment. Comments on the draft report are
submitted to the Audit Chairperson who then prepares and issues the
final report to the Audit Committee, Corporate Environmental Manager,
division manager, and other key operating groups. An example of a
section of Polaroid's audit report is given in Exhibit 2.
2. Audit Scoring
Each audit is given a score, based on the score of each section of
the audit report. The scoring system is used to give the divisions a
quantitative idea of how well they did on the audit. In addition, it
gives the audit team experience in quantifying environmental perfor-
mance and forces them to make judgments about the seriousness/impor-
tance of problems identified. (Such a system is also in effect for
Polaroid's safety audits.)
The Chairperson gives a preliminary score to each of the nine
audit sections. Each audit section is given a possible weighting (a
percentage) that relates to its importance. For example, sections on
surface water/ground water protection, hazardous/chemical waste dis-
posal, wastewater management, and air emission management are given
more weight (say, 14% each) than solid waste disposal and material
balance (say, 6-7% each). The total possible score for all nine sections
of the report must add up to 100%. Then, each auditor's observations
are listed for each section; each observation is given a maximum of 5 or
10 points depending on its significance. This is done for each section
of the report. Finally a composite score is calculated by determining a
percentage for each section, multiplying by the weighting figure
assigned to that section, and totalling the scores for each section.
3. Scoring Meeting
A Scoring Meeting is held between the Audit Chairperson, Corpo-
rate Environmental Manager and the audit host. The purpose of this
meeting is to announce the preliminary audit score and to determine a
final score. The Corporate Environmental Manager reviews the scoring
to ensure it is consistent with other audit scores. The audit host is
present to be informed of his facility's score.
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EXHIBIT 2
SECTION OF ENVIRONMENTAL AUDIT REPORT
SECTION 1: PERMITS
Objectives: To determine which permits and licenses are necessary and
required; for current site operations to determine which permits
and licenses have been obtained and their locations, and which
ones are missing; to determine which registrations and other
reports are required to be either submitted to an Agency or
maintained on site.
Findings: 1.1 With respect to the State Department of Public Safety -
Division of Fire Prevention, five required documents were
available and properly posted, while one was missing. The
ones available were:
(Annual certificates of registration)
(1) 300,000 gal. aboveground - Class A flammables
ref. 7/16/79 license - one dated 6/6/80; second dated
3/11/81; requirement to file each year prior to
April 30.
(2) 100,000 gal. Bunker C fuel oil - ref. 5/12/64 license -
one dated 10/22/79; one dated 6/6/80; one dated 3/11/81.
(License)
(3) 300,000 gallons aboveground Class A flammables dated
7/16/79 (actual <, 2/3).
(Permits)
(4) Flammable drum storage at (bldg) - (75 drums total
maximum; 20 inside maximum) part of 300,000 license -
dated 12/22/80.
(5) Flammable drum storage at (bldg) - (250 drums total
maximum) part of 300,000 license dated 12/22/80.
The document missing was a copy of the 1964 license for
Bunker C fuel oil storage.
1.2 Also in possession were two special permits for ethanol
storage totalling 32,000 gallons; this storage should be
construed as part of the 300,000 gallons allowance.
This report was prepared for purposes of this study. The comments contained
herein are for illustrative purposes only and do not reflect operating situa-
tions, actual or implied.
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EXHIBIT 2 (continued)
1.3 Missing was a copy of the letter from the State which
approves the design and operation of the fossil fuel facil-
ity; and also missing were the applications and requirements
of "RCRA interim status" for the site; although these docu-
ments are maintained in the Corporate Environmental Affairs
Office file, the Audit Committee is of the opinion that they
should also be kept somewhere on the site.
1.4 Approval letters for process air emissions (bldg), dated
6/78; (bldg), dated 9/78 were available on site.
1.5 With respect to wastewater discharges to the City of ,
the original approval letter (dated 4/78 and good for 90
days) and its 90-day extension were both available on site.
They've obviously expired and Polaroid continues to discharge
its sanitary and industrial wastewater as a "Tenant-at-Will"
pending the successful execution of a three-party discharge
contract among City #1, City #2, and Polaroid. A draft
version of the contract has been submitted to Polaroid,
comments were returned to the City #1 Sewer Commission, and a
revised contract is anticipated.
1.6 The site was in possession of the 9/80 parking survey done on
behalf of the EPA.
1.7 Required cross-connection permits were available (one dated
1/80 for the six-inch connection in meter pit; another dated
1/80 for the ten-inch connection in meter pit); although the
State also inspects an additional cross-connection at (bldg),
we neither have, nor are required to have, a permit for it.
1.8 No N.P.D.E.S. (National Pollutant Discharge Elimination
System) permit is necessary for any operation on site, since
all wastewater is discharged to the City P.O.I.W.,
rather than to the River.
1.9 The 5/78 letter from the City #2 Conservation Commission was
available on site; this letter followed a review with its
chairman, , of our planned site activities and
indicated that the Commission didn't need to be involved any
further with our activities.
1.10 A formal oil spill prevention plan (SPCC Plan) is required
and does exist for the site. Chemical spill control is
performed via a short guidance document which does not
reference relevant regulatory requirements such as
Section 311 of the Clean Water Act.
l.U In 1981, a 150-gallon oil spill occurred at the (bldg)
storage tank; although it was contained within the dike area,
thus avoiding any regulatory reporting, it nevertheless
should have been reported internally via a Spill Report, but
wasn't.
This report was prepared for purposes of this study. The comments contained
herein are for illustrative purposes only and do not reflect operating situa-
tions, actual or implied.
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4. Final Audit Meeting
Within two months of the audit, the final audit meeting is held .with
the Corporate Environmental Manager, division manager responsible for
the location being audited, appropriate division/site personnel, and the
Audit Committee. At this three- to four-hour meeting, which is run by
the Audit Chairperson, each item in the audit report is discussed. The
discussion focuses on: (1) what the audit team found during the audit;
(2) why it was noted in the audit report (i.e., legal requirement,
company policy, etc.); and (3) recommendations to correct the deficien-
cies noted. The audit score is also announced.
Follow-up
At this time, formal audit follow-up procedures have yet to be
established. It is anticipated that a six-month status report,
addressing each deficiency noted in the audit report will be prepared
by the Audit Host and submitted to the Corporate Environmental Man-
ager.
Records Retention
Although Polaroid does not have a formal records retention policy,
the audit reports are retained both in areas audited and in the Corpo-
rate Environmental Office. Additionally, each auditor keeps his/her
own files on each audit. These files include the checklists and any
notes taken during the audit.
PROGRAM BENEFITS AND DEVELOPMENTS
Polaroid's Corporate Environmental Manager sees the environmental
audit program as benefiting the company's environmental staff both by
helping them understand what the divisions/plants are doing in the
environmental area and by training them on specific environmental
activities. The program is also seen as a training vehicle for plant
personnel—regarding regulatory requirements, corporate policies and
procedures, and activities at other plants.
Polaroid has three other environmental auditing programs in place.
These programs are less formal and have a more specific focus than the
environmental auditing program.
• DOT Compliance Audits—at least two times a year, a Pack-
aging Engineer who specializes in Department of Transporta-
tion (DOT) regulations visits each Polaroid loading dock in
Massachusetts. The purpose of this visit is to audit Pola-
roid's compliance with DOT regulations for container selection,
package marking and labelling, and shipping paper documen-
tation. These audits are not formally documented. When
specific problems are identified, they are communicated via a
note or telephone call to the appropriate persons.
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RCRA Manifest Compliance Audits—Polaroid maintains a
Resource Conservation & Recovery Act (RCRA) Control Cen-
ter which monitors all hazardous waste shipments. Part of
this monitoring is to comply with the cradle-to-grave manifest
controls imposed by RCRA. The remainder of this monitoring-
is essentially a random audit of how accurately Polaroid's
generators are utilizing the manifest procedures. Items such
as identification numbers, code numbers, hazard designations,
and waste descriptions are reviewed. The primary method of
feedback is via a telephone call to the appropriate environ-
mental engineer.
RCRA Facility Compliance Audits—this audit program focuses
on Interim Status Requirements vis-a-vis Storage Permits and
Generator Requirements. A team from Corporate Health,
Safety & Environmental Affairs typically audits facilities when
there is a new regulation pending, or in anticipation of state
inspections.
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V. PENNSYLVANIA POWER & LIGHT COMPANY'S
ENVIRONMENTAL QUALITY ASSESSMENT PROGRAM
In 1976, Pennsylvania Power & Light Company became one of the
first utilities in the United States to voluntarily establish an internal
environmental auditing program. The program is called the Environ-
mental Quality Assessment Program and was initiated as a result of a
1974 operational review performed by an outside consultant. This
review was made to help the company determine whether it was taking
full advantage of all significant opportunities to reduce costs without
degrading the quality of service provided to its customers. The review
resulted in the recommendation that PP&L improve its quality control
procedures. PP&L's top management followed the recommendation and
initiated the assessment program. The term "assessment" was chosen
for the program to distinguish it from PP&L's Nuclear Quality Assurance
Program.
The authority and responsibility for implementing the Environ-
mental Quality Assessment Program has been assigned to the Executive
Vice President of Operations and delegated to the Supervisor, Environ-
mental Auditing/Modeling. The Auditing/Modeling Section is a part of
the Environmental Management Division and has a staff of five full-time
auditors.
BACKGROUND
Pennsylvania Power & Light Company's electric and steam genera-
tion operations produced sales of $1.4 billion in 1982. Major organiza-
tional components of PP&L include six operating divisions, eight power
plants, thirteen strip mines, two coal loading and cleaning facilities,
one heated oil pipeline, and five deep mines.
PP&L's Environmental Management Division was established in 1972
and is housed within the System Power & Engineering Department. The
Division's mission is to:
• Audit compliance with PP&L's environmental policies;
• Audit the design, construction, and operation of company
facilities;
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• Ensure responsible company behavior in environmental mat-
ters; and
• Cooperate with regulatory bodies, industry, and the general
public in an atmosphere of full disclosure of environmental
matters affecting the company and the citizens in its service
area.
The Division, headed by the Manager-Environmental Management,
has 26 full-time employees within its three major groups:
• Licensing Section—deals with new licensing and relicensing
requirements
• Planning Section—deals with new and developing environ-
mental regulations
• Auditing/Modeling Section—responsible for the environmental
auditing and modeling function.
The Manager of the Environmental Management Division reports to
the Vice President-Engineering & Construction who in turn reports to
the Senior Vice President-System Power & Engineering. This Senior
Vice President reports to the Executive Vice President-Operations.
Each of PPiL's power plants has one full-time person whose prime
responsibility is environmental matters. This person reports directly to
the plant superintendent who reports to the Manager-Power Production.
There is also an environmental coordinator at each division. This
coordinator has part-time environmental responsibility and reports to
the vice president of the division.
In addition to the staff described above, there are also people with
environmental responsibilities in the Distribution Department (concerned
with right-of-way activities), and the Bulk Power Department (respon-
sible for environmental impact statements for transmission and substa-
tion siting).
PROGRAM PURPOSE
The objectives of PP&L's Assessment Program are to:
(1) Help line managers achieve the environmental compliance
objectives set by the company;
(2) Increase facility personnel's awareness of existing regulations
and the compliance priorities set by the company;
(3) Provide objective information to upper management so thnt
corporate policies and procedures can be revised as needed;
and
(4) Help corporate managers understand where the operating
groups are in the compliance process.
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The goals of each individual audit are to help line managers achieve
compliance and increase their awareness of environmental regulations.
Top management maintains support of the program through a
written Statement of Authority and Responsibility, issued by the Execu-
tive Vice President-Operations. This statement, issued to all facilities
and incorporated into the Environmental Quality Assessment Manual,
describes the authority and responsibility for implementing the Environ-
mental Quality Assessment Program and outlines how differences of
opinion between the Auditing Section and other functional groups will
be resolved.
The program and its goals are communicated throughout the com-
pany by internal publications and the Statement of Authority and Res-
ponsibility. In 1980, the program was also described in the company's
Annual Report.
PP&L also has written environmental policies and an Environmental
Response Manual and Environmental Compliance Guidebook detailing
these policies and responsibilities. Included in the Manual are
facility-level procedures to implement the corporate policies. The
Manual is prepared by the Licensing Section with input from the divi-
sions and/or power plants, is signed by the Manager-Environmental
Management, and is issued to power production facilities by the
Manager-Power Production. The Guidebook, prepared by the Environ-
mental Management Division, provides general guidance on environmental
requirements affecting PP&L's divisional activities.
PP&L basically has three tiers of policies and procedures:
(1) Operational Policy Statements—generic corporate policies
issued by the Environmental Management Division and other
corporate groups.
(2) Functional Unit Policies—policies, issued by the Environmental
Management Division, which outline how to implement the
operational policy statements.
(3) Bottom Tier Procedures—"how-to" guidelines developed and
issued by the plants and informally reviewed by the Licensing
Group within Environmental Management.
ORGANIZATION AND STAFFING
PP&Lls Assessment Program is managed by the Auditing/Modeling
Section of the Environmental Management Division. The Supervisor-
Environmental Auditing/Modeling has a full-time staff of six people—one
modeler and five auditors. Two of the five auditors are assigned solely
to nuclear activities and the remaining three to nonnuclear activities.
Figure 1 depicts the organizational relationships of the Assessment
Program.
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FIGURE 1
ORGANIZATIONAL RELATIONSHIP OF ASSESSMENT PROGRAM
BOARD OF
DIRECTORS
I
2
PRESIDENT &
CHIEF EXECUTIVE OFFICER
EXECUTIVE VICE PRESIDENT
OPERATIONS
SENIOR VICE PRESIDENT
SYSTEM POWER 5.
ENGINEERING
SENIOR VICE PRESIDENT
DIVISION OPERATIONS
15
ee
£
ta
ce
CO
o
a
g
s
VICE PRESIDENT
ENGINEERING &
CONSTRUCTION
MANAGER
POWER PRODUCTION
DIVISIONS'
VICE PRESIDENTS
MANAGER
ENVIRONMENTAL
MANAGEMENT
PLANT
SUPERINTENDENT
ENVIRONMENTAL
AUDITING/MODELING
SECTION
(ASSESSMENT FUNCTION)
FNVIRONMENTAL
SCIENTISTS
ENVIRONMENTAL
COORDINATORS
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The Auditing/Modeling Section interacts with several other depart-
ments within PP&L. For example, the section performs services for the
Power Production Department and Division Operations such as opacity
readings, environmental noise measurements and (at the request of the
facility) special audits such as Prevention of Significant Deterioration
audits.
A written charter for the Assessment Program has been prepared
by the Supervisor-Environmental Auditing/Modeling and incorporated
into the Environmental Quality Assessment Manual. This manual
includes procedures for the auditor to follow, such as a standard
method for documenting and reporting deficiencies; methods to assure
that all required testing and analysis procedures are identified and per-
formed properly; procedures for corrective action to resolve deficiencies
noted during an audit; and procedures for planning, performing, docu-
menting, and evaluating audits.
The five auditors have technical backgrounds in areas such as
quality assurance, chemistry, radiochemistry, biology, geology, mech-
anical engineering, and experience in water and wastewater treatment,
ambient air and air emissions, and toxic substances. In addition, the
two nuclear auditors are certified to the standards of the American
National Standards Institute.
All auditors must participate in a training program that provides
updates on new regulatory requirements. The program is structured so
that each auditor becomes familiar with and participates in the different
areas of the audit. In addition, each non-nuclear auditor attends
opacity school and is recertified every six months.
The Personnel Department has prepared written job descriptions
for each member of the Assessment Program. These job descriptions
outline the nature and scope of the position, the reporting relation-
ships, how the position interfaces with other parts of the organization,
and the position's responsibilities.
The yearly budget for the Assessment Program is about $300,000.
AUDIT SCOPE AND FOCUS
The scope of the Assessment Program is U.S. facilities and
includes: power production facilities (coal, oil, nuclear and hydro),
combustion turbines and diesel generators, PP&Lfs six operating divi-
sions, strip mines, coal loading facilities, deep mines, a heated oil
pipeline, and a chemical laboratory. When necessary, audits are also
conducted of off-site disposal operations, as well as the activities and
programs of PP&L's outside consultants. The compliance scope includes
all federal, state, and local environmental regulations.
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The scope of each individual audit is tailored to the specific
facility. There are 26 possible audit subjects:
Air:
Visible emissions EPA method 9
In-stack emissions monitors (calibration, documentation,
etc.)
Ambient monitors (calibration, documentation, etc.)
Fugitive dust regulations
Asbestos regulations
Volatile organic compound emission regulations
Water:
National Pollutant Discharge Elimination System (sample,
analysis, and documentation)
Spill Prevention Control and Countermeasures Plan
National interim primary drinking water regulations
Erosion and sedimentation regulations
Dams and encroachments
Water quality management program (sampling, analysis
and documentation)
Solid and Hazardous Waste:
Hazardous waste regulations
PCB regulations
Off-site disposal, on a sample basis
Department of Transportation regulations governing the
transportation of liquids (pipeline)
Mining:
Office of Surface Mining Regulations
Pennsylvania Surface Mining Conservation and Rec-
lamation Act
Other:
Nuclear Regulatory Commission—low-level regulations
(detectors in coal silos and pipelines)
Noise (levels at fence line)
Pennsylvania Fire Marshall regulations
Laboratory quality assurance/quality control procedures
General overall inspection of the facility
Review of in plant procedures
Compliance review of special agreements of understand-
ing, memoranda of understanding, and consent agree-
ments
Verification of corrective action on previous audit find-
ings
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The focus of each audit includes:
Federal, state, and local environmental regulations
Permits
Corporate policies and procedures
Corporate records and technical data
Environmental control systems
Quality assurance programs
Codes
Contractual and licensing requirements
Accepted practices
Since the audit scope is tailored to each facility, the audit may
include such elements as:
• For Pipeline Assessments—the audit typically includes all
pollution control regulations (air, water, and solid waste),
Department of Transportation, Spill Prevention Control and
Countermeasures (SPCC), and Fire Marshall regulations.
• For Mining Assessments—the audit includes Office of Surface
Mining regulations, State mining regulations, PCBs and haz-
ardous wastes, NPDES, State Water Quality, SPCC, erosion
and sedimentation control, and drinking water regulations.
Audits may also be performed on new sites prior to purchase.
AUDIT TIMING AND FREQUENCY
PP&L conducts about 30 audits per year. Each facility is on a
two-year audit cycle except for the nuclear facilities. (The audit cycle
for the nuclear facilities is determined by their specific license
requirements.) Each audit covers the period since the last assessment.
Typically, an announcement of the audit is made to the facility 30
days in advance. This notice includes instructions for preparing for
the audit, the names of the auditors, and the audit scope. Two weeks
prior to the audit a detailed schedule of the audit is sent to the facil-
ity. Occasionally, the Assessment Program conducts "surprise" or
"impromptu" assessments, usually when there appears to be a potential
problem or concern at a facility.
AUDIT METHODOLOGY
PP&L's program is comprehensive (multi-media), independent (from
the facility being audited and the person receiving the audit report),
in-depth (using a multitude of auditing techniques), and documented
(with working papers and reports). The basic phases of PP&L's pro-
gram are described on the following pages:
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Phase I: Audit Preparation
Prior to the actual on-site audit, the auditors:
• Rex-lew all Federal, state, and local environmental regulations
pertaining to the audited facility;
• Review plant policies and procedures;
• Review the audit checklists for each regulation and update,
as necessary, for any changes;
• Review past audit reports;
.• Review financial records for new purchases of equipment; and
• Telephone the facility to discuss any new developments.
Phase II: On-Site Audit
Audits of power production facilities and operating divisions typi-
cally last three days with a team of two to three auditors. At "the
beginning of the audit, the audit team meets with facility personnel.
At this pre-audit meeting, the detailed audit schedule is reviewed,
areas to be audited are explained, and any questions the facility per-
sonnel may have are addressed. The auditors then conduct the audit,
which includes such areas as:
• Taking opacity readings;
• Measuring noise levels;
• Reviewing maintenance and calibration checks of pollution
control equipment;
• Assessing NPDES compliance by: observing samples being
taken, observing how the analyses are performed, checking
the raw data and verifying the analytical results, examining
sample records, and taking split samples (which are given to
an outside laboratory to verify the facility's analyses); and
• Checking the facility's PCB activities, including labeling and
storage operations.
The techniques used by the team include:
• Document review (for example, a review of NPDES permits to
ensure compliance).
• Evaluation (for example, of plant procedures to see whether
they are appropriate to get the job done).
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• Verification (for example, the span and zero drift of the
in-stack monitoring instruments).
• Analyses by outside laboratories (of ponds or discharges) and
verification by the team of the laboratory numbers with those
of the facility.
• Investigation (for example, dye testing a drain to ensure that
it is in compliance with permit and/or engineering drawings).
• Inspections (for example, of facility discharge structures).
In addition, the team employs checklists, questionnaires and infor-
mal interviews with facility personnel. Also, photographs are used to
document the audit.
Exhibit 1 presents a portion of a Spill Prevention Control and
Countermeasures checklist. The full checklist is five pages long and
includes 23 items pertaining to SPCC plans and requirements. Similar
checklists for each of the 26 audit subjects serve as guides for the
auditor to assure both that the audit focuses on all the necessary areas
of the particular subject and that the auditors use the correct regula-
tory requirements. Checklists are completed by the auditor for each
audit area and serve as the basis for the audit reports.
Phase III: Reporting Process
PP&L's reporting process begins with oral reporting of the audit's
findings by the audit team during the audit exit interview with the
facility management and staff. Here the audit findings are discussed
and facility personnel have the opportunity to clear up any misunder-
standings and to comment on the audit. Next, the audit team prepares
a formal written report on each audit. The purpose of the report is to
inform line and corporate management of the status of the facility's
environmental compliance and to help line management attain compliance
by identifying areas where the facility is not in compliance and deline-
ating the corrective actions to be taken to achieve compliance.
Other reporting includes a written six-month report which is coor-
dinated with the Financial Audit Department. This formal report goes
to the Audit Committee of the Board of Directors and provides both
comfort and knowledge of any outstanding issues to be resolved.
In addition, the Supervisor-Environmental Auditing/Modeling,
reports monthly to the Senior Vice President-System .Power & Engi-
neering, both orally and in writing on major problems and also positive
areas (exceptionally good practices) uncovered during the audits.
Report Preparation
Audit finding sheets are prepared by the audit team prior to the
audit's exit interview and are reviewed by key facility personnel.
(Exhibit 2 lists instructions for the auditor to follow in preparing the
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EXHIBIT 1
PARTIAL CHECKLIST FOR SPCC AREA
SPCC CHECKLIST
Yes
1. Due to the facilities location, would an
oil spill reasonably be expected to
discharge to a navigable water or
shoreline?
2. Does the facility have an underground
oil storage capacity of more than 42,000
gallons?
3. Does the facility have an unburied oil
storage capacity of more than 1,320
gallons (composite) or a single oil
storage container of 660 gallons?
NOTE: If the answers to all the above 3
questions are No, SPCC regulations are not
applicable!
4. Has the SPCC Plan been reviewed and
certified by a Registered Professional
Engineer? (Required).
5. Is a copy of the SPCC Plan available at
the site or at nearest field office if
site is unattended? (Required).
6. Has the SPCC Plan been reviewed and
evaluated within the last 3 years? Are
amendments, if needed, completed within
6 months of the review? (Required).
7. Have all SPCC Plan amendments been
certified by a Registered Professional
Engineer? (Required).
8. Does the plan include appropriate
containment and/or diversionary struc-
tures or equipment to prevent discharged
oil from reaching a navigable water
course (See Sect. 112.7 (c) (1)), or a
strong oil spill contingency plan, or a
written commitment of manpower, equip-
ment and materials to control and remove
oil discharged?
9. Do all secondai
provic
No
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EXHIBIT 2
AUDIT FINDING SHEET INSTRUCTIONS
INSTRUCTIONS FOR THE AUDIT FINDING SHEET*
Items 1-4 These items are self explanatory.
Item 5 The finding number consists of the audit number followed
by a hyphen and a number. The numbers shall be consecu-
tive (i.e., the first finding in audit 84001 shall be
84001-01 the second finding 84001-02, etc.).
Item 6 One of the following finding types shall be placed in
this section:
• Significant Finding - A finding which is in conflict
with federal, state, or local requirements, or
Company Policy and requires that corrective measures
be taken to achieve compliance.
• Noncompliant Finding - A finding which is in con-
flict with Federal, .State, or Local requirements, or
Company Policy, however, due to its nature cannot be
corrected. An explanation of the cause of the
problem and a method to prevent its recurrence may
be required at' the discretion of the Supervisor-
Environmental Auditing/Modeling.
• Notable Finding - A finding which is documented, but
is not in conflict with any requirements and does
not require corrective action (recommendations).
Item 7 The requirement to which a finding refers should be
placed in this section.
Item 8 The audit finding shall be described in this section.
Item 9 The action which has been taken to resolve the deficiency
shall be placed in this section. The cognizant manager
shall sign and date this section.
Item 10 The action taken to resolve the deficiency shall be
verified by the auditors. If corrective action has been
taken and is acceptable, this section shall be signed and
dated by the Audit Team Leader or other responsible
member of the audit team.
* Items 1-7, 9 and 10 are to be completed by the Audit Team Leader.
Item 8 is to be completed by the auditee and returned with the
audit reply.
WKB:nas
WKB226
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sheet. Exhibit 3 presents an example of a completed audit finding
sheet.) These forms, along with the audit checklists, provide the basis
for the final written report. Typically, a draft report is prepared
within 15 days after the audit and reviewed by the audit team members.
The Supervisor-Environmental Auditing/Modeling occasionally submits
the draft to the Legal Department for review of the team's interpreta-
tion of environmental regulations. The Legal Department acts as a
"contributor" to the audit report only in certain cases (and those cases
are determined by the Supervisor). Comments are reviewed by the
audit team and Supervisor and incorporated into the final report. The
draft report also is submitted to the facility management for review.
The Supervisor and audit team leader then hold a draft report review
meeting at the facility with the key facility personnel to go over each
item of the draft report. The final report is then prepared, signed by
both the Supervisor and the audit team leader, and issued within 30
days of the audit.
The audit report is both a comfort statement (for example, stating
that the facility meets or exceeds what is required by the regulations)
and an exception list. Good practices at the facility are noted, and
recommendations are given.
Report Format
PP&L's audit report format is depicted below:
Outline of PP&L'S Audit Report
PART I: Executive Summary
PART II: Detailed Audit Report
1. Scope
2. Audit Participants
3. Exit Interview
4. Definitions:
a. Significant Findings
b. Noncompliant Findings
c. Notable Findings
5. Audit Results
a. Air
(1) Significant Findings
(2) Noncompliant Findings
(3) Notable Findings
b. Water*
* Additional Sections, as appropriate, depending on the
scope of the audit.
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EXHIBIT 3
EXAMPLE OF AUDIT FINDING SHEET
AUDIT FINDING SHEET
1. Audit lean Leader 4. Date
2. Facility 5. Finding No.
3. Audit No. 6. Finding Type
Requirement: 40 CFR 141. "National Interim Primary Drinking Water Regu-
lations": "141,2 Definitions...(e) 'Public water system means a system for the
provision to the public of piped water for human consumption, if such system has
at least fifteen service connections or regularly serves an average of at least
twenty-five individuals daily at least 60 days out of the year...1
141.33 Record Maintenance. Any owner or operator of a public water system
subject to the provisions of this part shall retain on its premises or at a
convenient location near its premises the following records:
(a) Records of bacteriological analyses made pursuant to this part shall
be kept for not less than five years. Records of chemical analyses
made pursuant to this part shall be kept for not less than 10
years..."
8. Description of Finding:
Copies of the analyses performed on the
ground water supply are not being kept on site. The
original test results are kept at the
Service Center.
9. Action Taken By Responsible Organization: Copies of analyses reports performed
on the ground water supply were forwarded to the Area Foreman,
[Service Center, on April 15, 1981. In the future, copies of
analyses reports will be forwarded on a regular basis. A complete up-to-date
file will be maintained at the Service Center; however, original copies will be
retained at the Service Center
Cognizant Individual Date
10. Closeout of Finding
Closed By Date
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The audit report, typically 30 pages in length, is written in tv:o parts:
Part I: Executive Summary: One-line descriptions of the find-
ings in each area included in the scope of the audit.
Part II: Detailed Audit Report—Listing of the Federal, state and
local requirements applicable to the facility of the spe-
cific audit findings, exceptions as well as good prac-
tices. This section of the report is in five parts:
1. General: A listing of each area covered in the
audit scope.
2. Audit Participants: A listing of the audit team and
team leader, as well as the participants from the
facility.
3. Exit Interview: A listing of the exit interview
attendees, and the date of the interview.
4. Definitions: Definitions of each type of finding:
Significant findings: findings in conflict with
Federal, state and local requirements and/or
company policies which require corrective
actions.
Noncompliant findings: findings in conflict
with Federal, state and local regulations
and/or company policies which, due to their
nature, cannot be corrected. (For example,
the NPDES permit requires four samples to be
taken per month, and the facility took only
three samples per month.)
Notable findings: findings not included above
but documented here more to anticipate future
problems. Examples may include management
practices at the facility, storage of materials,
areas identified which may be impacted by
potential new regulations. Recommendations
are also included here.
5. Audit Results: Each area within the scope of the
audit is reported separately, such as test results,
documentation, visible emission readings, pictures
taken, and plant layout. This is followed by a
listing of the three types of findings.
Exhibit 4 presents a portion of PP&L's audit report covering only
one area of the audit's scope.
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EXHIBIT 4
AN EXAMPLE OF PORTIONS OF PP&L'S AUDIT REPORT
cc: Senior Vice President
Manager-Environmental Management
Manager-Auditing
Assistant to Manager-
Power Production
Supervisor-Environmental Licensing
Vice President-Engineering &
Construction
Manager-Power Production
TO: FACILITY SUPERVISOR
FACILITY
ENVIRONMENTAL AUDIT OF MAY 25, 26, and 28, 1982
REPORT
An environmental audit of FACILITY was conducted by the PL Environmental
Management-Audit Section on May 25, 26 and 28, 1982. The scope of the
audit included an investigation of the adequacy of and adherence to estab-
lished procedures and compliance with requirements governing environmental
and related activities. The _______ system was not included in the
scope of this audit because it had only recently been put into operation.
This system will be audited at a later date.
Areas examined'during the course of the audit consisted of selected exam-
inations of procedures and representative records, interviews with plant
personnel and observations by the auditors. Overall, the areas met or
exceeded what was required. The following is a summary of the audit
conclusions.
• The operation of the facilities, sampling and analysis, and
documentation required for the National Pollutant Discharge
Elimination (NPDES) and Water Quality Management permits were
found to satisfy the requirements for the most part.
• In general, FACILITY'S Spill Prevention Control and Counter-
measure (SPCC) Plan was found to be in conformance with 40 CFK
112, with the exception that several oil druirs stored by Con-
struction were not included in the SPCC Plan. Also, some incon-
sistencies exist with the way that the gasoline inventory records
are being maintained.
• The FACILITY was observed to be in conformance with the appli-
cable air pollution control regulations during the audit.
However, the monthly fugitive dusting inspections of the bottom
and fly ash basin are not being documented.
This report was prepared for purposes of this study. The comment's con-
tained herein are for illustrative purposes only and do not reflect situ-
ations, actual or implied.
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EXHIBIT 4 (continued)
SECTION II
FACILITY
ENVIRONMENTAL AUDIT REPORT
PL ENVIRONMENTAL MANAGEMENT
MAY 25, 26, and 28, 1982
I. GENERAL
The environmental audit of FACILITY consisted of the following:
A. Verification that sampling and analysis are implemented and docu-
mented, and that operational and reporting requirements are
complied with as stated in FACILITY'S National Pollutant Dis-
charge Elimination System (NPDES) and Water Quality Management
permits.
B. Verification of the implementation of a Spill Prevention Control
and Counterneasure (SPCC) Plan, including applicable fire mar-
shall regulations.
C. Verification that Erosion and Desimentation'Control Plan Permits
have been obtained where needed.
D. Verification that FACILITY meets the requirements of the Air
Pollution Control Permits and FACILITY'S Fugitive Dusting plan.
E. Verification of compliance with Volatile Organic Compound Emis-
sion Regulations.
F. Visible emissions tests using EPA Method 9, and a comparison of
visible emissions vs. opacity monitor readings.
G. Verification that the continuous stack monitoring devices are
installed, operated and documented as required by the PA Air
Resources Regulations.
H. Verification that Polychlorinated Biphenyls (PCBs) are marked,
stored and disposed of in accordance with 40 CFR 761.
I. Verification that asbestos is removed and disposed of in accor-
dance with 40 CFR 61.
J. Verification that corrective measures provided for in previous
audits have been or are being instituted.
K. A general inspection of the FACILITY.
L. Noise level monitoring performed at the fence line.
This report was prepared for purposes of this study. The comments con-
tained herein are for illustrative purposes only and do not reflect situ-
ations, actual or implied.
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EXHIBIT 4 (continued)
II. Audit Participants
Environmental Management FACILITY
Audit Team Leader FACILITY Personnel
Audit Team Members
III. Exit Interview
An audit exit interview was held on May 28, 1982, at FACILITY. The
findings of the audit were discussed among Environmental Auditing
(represented by the audit team), and FACILITY (represented by
FACILITY personnel).
IV. Definitions
1. Significant Finding - A finding which is in conflict with
federal, state or local requirements, or company policy and
requires that corrective measures be taken to achieve compliance.
2. Noncompliant Finding - A finding which is in conflict with
federal, state or local requirements, or company policy; however,
due to its nature cannot be corrected. An explanation of the
cause of the problem and a method to prevents its recurrence may
be required at the discretion of the Supervisor-Environmental
Auditing/Modeling.
3. Notable Finding - A finding which is documented, but is not in
conflict with any requirements and does not require corrective
action (recommendation).
V. Audit Results
A. NPDES and Industrial Waste Permits
FACILITY'S NPDES permit expired on June 14, 1981; however, an
Interim NPDES Permit application was made on December 16, 1980,
which is within the required 180 day period. Monthly monitoring
reports and the associated documentation for FACILITY'S NPDES
permit No. , Industrial Waste Permit No. (Sewage
Treatment Plant) were reviewed for the period of January, 1981 to
April, 1982. The auditors are satisfied with the completeness of
this data. Inspections were made of the various outfalls and the
treatment basins. The sewage treatment plant was found to be
operating satisfactorily and the bottom and fly ash basin dike
collection system was also found to be operating properly.
This report was prepared for purposes of this study. The comments con-
tained herein are for illustrative purposes only and do not reflect situ-
ations, actual or implied.
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EXHIBIT 4 (continued)
In general, the sampling and analysis methods, facility opera-
tion, documentation and reporting were found to satisfy the
requirements for the NPDES and Industrial Waste permits. The
auditors also collected samples from the (Detention
Basin) and (Storm Water Basin) Discharges which were
analyzed by the Lab (see Attachments A and B). The
results of these analyses are as follows:
Sample Sample
Outfall Date
5-26-82 Oil and Grease
5-26-82 Arsenic
5-26-82 Total Iron
6-15-82 PCB
6-15-82 Oil and Grease
NOTE: This sample was analyzed by Laboratories.
These sample results are all within the limits imposed by
FACILITY NPDES and Industrial Waste Permits.
The following findings were noted in the NPDES and Industrial
Waste areas:
1. The following are considered to be significant findings
(require that corrective measures be taken):
a. Requirement 1: 40 CFR 136.3 (a), "Environmental
Protection Agency Regulations on Test Procedures for
the Analysis of Pollutants," states in part:
"(a) Every parameter of pollutant for which an effluent
limitation is now specified pursuant to section 401 and
402 of the Act is named together with test descriptions
and references in Table I. The discharge parameter
values for which reports are required must be deter-
mined by one of the standard analytical methods cited
and described in Table I,...Table I - List of Approved
Test Procedures...15. Chlorine-total residual, milli-
grams per liter. - lodo metric titration, amperometric
or starch-iodine end-point - 1974 EPA method pg. 35 or
14th ed. standard methods pgs. 318, 322, and 329..."
Contrary to the above requirements, .^____^^____
This report was prepared for purposes of this study. The comments con-
tained herein are for illustrative purposes only and do not reflect situ-
ations, actual or implied.
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EXHIBIT 4 (continued)
2. Ihe following are considered to be noncompliant findings (no
response required):
a. Requirement: Page 18, Section A2 "Noncompllance Notifica-
tion," of NPDES permit states:
"If for any reason, the permittee does not comply with or
will be unable to comply with any daily maximum effluent
limitation specified in this permit, the permittee shall
provide the Regional Administrator and the State with the
following information, in writing, within five (5) days of
becoming aware of such condition:
1. A description of the discharge and cause of noncorapli-
ance; and
2. The period of noncompliance, including exact dates and
times; or, if not corrected, the anticipated time the
noncompliance is expected to continue, and steps being
taken to reduce, eliminate and prevent recurrence of
• the noncomplying discharge."
Contrary to the above, noncompliance notifications are not
always submitted in writing within five days. Examples
include two instances of problems with the bottom and fly
ash basin dike collection system which occurred on February
18, 1981, and September 4, 5, and 6, 1981. The noncompli-
ance notifications were submitted on March 16, 1981, and
November 17, 1981, respectively.
3. The following is considered a notable finding (recommendation):
a. Not covered by regulation yet is the preparation of a PPC
plan which consolidates Pollution Incident Prevention (PIP),
Spill Prevention Control and Countermeasure (SPCC), Best
Management Practices (BMP), and Contingency Planning. The
DER has not established an absolute deadline for plan
submitcal, although industry is encouraged to submit before
the new NPDES permits are issued. Permit applications will
not be considered incomplete if not accompanied by a PPC
Plan, but the new permit will most likely contain a require-
ment to submit a plan by a specified date if the permittee
has not already done so.
This report was prepared for purposes of this study. The comments con-
tained herein are for illustrative purposes only and do not reflect situ-
ations, actual or implied.
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Report Distribution
Copies of the audit report are distributed to: the supervisor of
the group being audited, the section head of the group being audited,
the division/department head of the group being audited, the group
vice president, the management of the department conducting the audit,
the Offices of Corporate Administration, and the Auditing/Modeling
Section.
Report Follow-Up
A cover letter is sent along with the audit report explaining the
format of the report and the procedure for replying. A response to
the audit report is required from the facility manager within 30 days of
the report's issuance. A written plan for preliminary corrective action
is prepared by the Facility Manager with input from those responsible
for each function and is submitted to the Supervisor-Environmental
Auditing/Modeling. Copies of the action plan are submitted to the
addressees of the audit report, and follow-up reports on the action
plans are required every 60 days until the problems are corrected.
The Supervisor reviews the plans for their appropriateness and time-
liness, and ensures that the proposed corrective actions are being
taken. In addition, if the action plan calls for the purchase of capital
equipment, the Supervisor can check with the Financial and Purchasing
Departments to ensure that the appropriate equipment was purchased.
As a further check on the corrective actions, on the next audit of
a facility the audit team verifies, through physical observation, that the
corrective actions detailed in the action plan have been taken.
If a conflict arises either because the finding was not answered or
because the response was not acceptable, a phone call is made by the
Supervisor-Environmental Auditing/Modeling to the appropriate facility
personnel. If an agreement cannot be reached, the Supervisor can
bring it to the attention of the appropriate vice presidents or
department heads until the conflict is resolved. The other means for
resolving conflicts is to implement the policy stated in the Statement of
Authority & Responsibility in which the Executive Vice President-
Operations has the ultimate decision. If there is a conflict, the
Supervisor notifies the Senior Vice President-System Power &
Engineering during their monthly meetings.
Report Retention
PPiL has a formal records retention procedure. All reports,
papers, and documents relating to the audit are kept in central files for
a minimum of three years.
ASSURING AUDIT QUALITY
A number of methods have been established to ensure quality and
effectiveness in the Assessment Program. For example, to ensure
consistency, once yearly, there is a cross over of auditors—the nuclear
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auditors audit the fossil activities, the fossil auditors audit the nuclear
activities. In addition, the Supervisor Environmental Auditing/Modeling
reviews all audit working papers, reports, and follow-up as an internal
check. The Supervisor also reviews each draft audit report with the
facility personnel. As a check on the Assessment Program's effective-
ness, previous audit findings are reviewed as part of the next assess-
ment at that location.
With respect to PP&L's nuclear facilities, a further check on the
audit program occurs during periodic inspections by the Nuclear Regu-
latory Commission and yearly inspections by the Nuclear Quality Assur-
ance Group. These two groups look at PP&L's audit reports and the
corrective actions taken (in such areas as NPDES, permits, monitoring,
etc.), and prepare an inspection report which goes to the Vice Presi-
dent, Engineering Construction Nuclear.
A final check on the Assessment Program is made through a Per-
formance Measurement Questionnaire. This two-page questionnaire is
based on the goals and objectives of the Assessment Program. It is
distributed to each person who was contacted during the audit and can
be returned to the Supervisor-Environmental Auditing /Modeling, anony-
mously, for evaluation. This evaluation forms a basis for any changes
in the Assessment Program and/or the program's staff.
PROGRAM BENEFITS AND DEVELOPMENTS
The Supervisor of PP&L's program sees many benefits derived as a
result of this program, including:
• Top management gains comfort in knowing where PP&L stands
regarding environmental compliance;
• Legal Counsel has seen a decrease in legal proceedings;
• Environmental Management sees the program as reinforcing the
awareness of environmental responsibilities throughout the
company, as well as the corporate commitment to environ-
mental matters;
• The Environmental Response Manual has been developed with
a number of policies and procedures delineating how to man-
age environmental compliance;
• PP&L personnel are now trained in environmental matters and
have been delegated environmental responsibilities;
• Facility personnel view the assessment program as a manage-
ment tool to help them manage their facility; and
• The audit is a planning tool which indicates areas where the
company's procedures or policies can be improved.
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Another benefit resulting from the program is providing the cor-
poration with information about compliance so that PP&L can responsibly
inform the public and regulatory agencies. This has enabled PP&L to
maintain favorable relations with both the general public and the regu-
lators. Although it has never been quantified, PP&L has seen a con-
siderable decrease in environmental fines and citations despite the fact
that regulatory agency inspections at their facilities have increased.
The Assessment Program has undergone several changes since its
inception in 1976. For example, initially the audit cycle was every year
(now it is a two-year cycle) and only power production facilities were
involved. Also, the audit report was widely distributed initially—going
to people who really had no need to receive it. The report distribution
is now more tailored to the managers responsible for the audited activi-
ties.
PP&L's program is continually evolving because of changes in
regulations and the increase in knowledge gained from audit to audit.
A potential change in the future might be to send out the checklists to
the facility prior to the audit. This would serve a dual purpose: first,
the facility can do its own self-audit during the off-year when no audit
is scheduled, and thus use the checklists as its own management tool;
ancl, second, the checklists, when sent to the facility 30 days prior to
the audit, would help the facility prepare for the audit, thus making
the audit more efficient.
PP&L's audit program—and program personnel—have numerous
external linkages. For instance, the program has been a topic at many
conferences. This has caused the program to be widely acknowledged
throughout industry, has attracted people to the company, and helps to
professionally develop the audit staff who are speakers at those confer-
ences. PP&L is also active within the Edison Electric Institute and the
Supervisor Environmental Auditing/Modeling is the Chairman of EEI's
Environmental Auditing Educational Task Force. PP&L is also very
active with ad hoc groups looking at the trends and developments of
environmental auditing and many informal networks developed with other
companies.
PP&L's program also has many innovative characteristics. One
example is the Performance Measurement Program, described previously.
After each audit, questionnaires are sent out to the audited facilities to
determine their opinion of the effectiveness of the audit and the com-
petence and professionalism of the auditors. The results are sent to
the Supervisor and tabulated yearly. These tabulations are forwarded
to the Executive Vice President-Operations. The Performance Measure-
ment Program allows PP&L to change the audit program, if necessary,
to make it more effective.
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Another innovative characteristic is the Environmental Award.
This award recognizes outstanding performance in adherence to environ-
mental regulations. A matrix is developed of the 26 areas of audit
scope, and each facility is given a grade point for each area. The
grade is based on number of exceptions, performance, and attitude.
The matrix is scored by Auditing/Modeling Section at the end of each
year. An award is given each year to a plant or division that scored
the highest on the matrix. The Environmental Award is communicated
through staff meetings and discussed in PP&L's employee publications.
The Award has increased the environmental awareness and compliance
effort with both management and facility personnel.
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VI. MILLIPORE CORPORATION'S GOVERNMENT
AND REGULATORY AFFAIRS AUDIT PROGRAM
Millipore Corporation's environmental audit program started in the
fall of 1981 at the initiation of the Chief Executive Officer and the
General Counsel. As a result of rapid corporate growth, top manage-
ment wanted additional assurance that the company's eight worldwide
manufacturing plants—six of which are in the United States—were
complying with environmental laws and regulations.
Millipore Corporation is considerably smaller and newer than the
other companies included in this study. Millipore's environmental audit
program reflects the size and entrepreneurial climate of the company.
It is also a somewhat newer audit program than most of the others
included in this study.
Millipore's audit program is concerned with all federal, state, and
local regulations (not just environmental) that impact the corporation's
products and operations. The program is managed by a regulatory
affairs specialist who devotes half time to the program. Staffing is
provided by the Audit Program Manager and personnel from divisional/
corporate staff.
BACKGROUND
Millipore Corporation is a relatively small (1982. sales of $272 mil-
lion), extremely fast-growing, high technology corporation that is
involved in developing, manufacturing, and marketing of separations
technologies used for the analysis and purification of fluids in high
value-added applications (e.g., Pharmaceuticals, electronics, etc.).
During the last 10 years, the company has had an average annual
percentage growth rate in sales and net income of more than 22% per
year. Along with the rapid growth have come numerous organizational
changes.
Millipore's Government and Regulatory Affairs Department, with a
staff of three people, is responsible at the corporate level for regu-
latory issues related to its products, the environment, and the work-
place. The Director of Government and Regulatory Affairs reports to
the Senior Vice President and General Counsel, who reports to the
Chief Executive Officer.
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Within each of two divisions, one person is responsible for quality
assurance and regulatory affairs. The Quality Assurance and Regula-
tory Affairs Manager reports to the division's Vice President of Opera-
tions. This organization structure is depicted in Figure 1.
PROGRAM PURPOSE
Millipore's Government and Regulatory Affairs Audit Program has
three objectives:
1. To evaluate the products, systems, and operations at various
locations based on conformance with company policies and
applicable laws and regulations, and to report the evaluation
to corporate and division management;
2. To assist division management in identifying deficiencies which
could adversely affect products, processes, and their impact
on customers, employees, and the environment; and
3. To secure information that will permit the company to antici-
pate and prevent problems.
A statement of purpose for the audit program, written by the
program's manager and approved by the Director, Government & Regu-
latory Affairs, is distributed to each facility at the beginning of each
year and again prior to each facility audit.
As is the case with many of its other activities, Millipore does not
have a written corporate environmental policy statement or written
corporate environmental policies or procedures. Each facility has its
own standard operating procedures, which are issued by the facility
and reviewed at the division level.
ORGANIZATION AND STAFFING
The audit program, housed within Corporate Government and
Regulatory Affairs, is managed by a government and regulatory affairs
specialist who devotes half time to the audit function and reports to the
Director, Government and Regulatory Affairs.
Each audit is conducted by the audit program manager and, usu-
ally, another person from the corporate or division staff with training
and experience in an environmental, health, or safety discipline.
Millipore's audit program attempts to make the distinction that key staff
from the facility being audited are part of the audit team rather than
auditees. Accordingly, the Millipore audit program also calls for a
facility team of two to five people from the facility undergoing the
audit. Typically, the facility's quality assurance/regulatory affairs
manager, manufacturing manager, safety and environmental coordinator,
and facility manager are included as members of the facility audit team.
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FIGURE 1
MILLIPORE ENVIRONMENTAL ORGANIZATION STRUCTURE
Chairman &
Chief Executive Officer
President &
Chief Operating Officer
Senior Vice President
& General Counsel
Director, Government
& Regulatory Affairs
Manager, Corporate
Audit Program
President,
Millipore Products Division
President
Waters Division
Vice President,
Operations
Vice President
Operations
Quality Assurance
& Regulatory Affairs
Quality Assurance
& Regulatory Affairs
Arthur D. Little, Inc.
93
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The facility team works closely with the corporate auditor(s), respond-
ing to questions and issues as they arise during the audit.
Millipore's Audit Program Manager is active in professional societies
(such as the Regulatory Affairs Professional Society) to keep abreast of
environmental auditing activities and developments.
An audit can take from three to five days with one or two audi-
tors. The program's yearly budget is approximately $30,000.
AUDIT SCOPE AND FOCUS
The scope of Millipore's audit program includes six U.S. and
Puerto Rican manufacturing facilities and the company's 12 active
Regeneration Centers. (These Regeneration Centers are nonmanufac-
turing facilities which regenerate deionization resin cylinders as part of
a service.) The audit covers all operations carried out at the facility.
Off-site activities are the responsibility of each facility and are not
directly included in the corporate audit program.
The scope of each individual audit includes all federal, state, and
local regulations (not just environmental), permits, facility policies and
procedures, environmental control systems, and quality assurance
programs. The functional scope of the audit may vary depending on
the facility's operations. (For example, some facilities have sterilization
operations; some generate radioactive wastes.)
The functional scope of the audit program includes the following
areas:
• Environmental:
Air pollution control
Water pollution control
Solid and hazardous waste management (including
"vendor audits" of hazardous waste disposers)
• Workplace issues:
Organization and administration of safety program
Training/inspections
Internal controls
Fire protection
Noise
Handling and storage of hazardous materials
Machinery
Protective equipment
Exposure
Medical (examinations, first-aid, surveillance)
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• Quality assurance:
QA program and systems
Document control
Label control
Incoming inspections
Recall
Complaint system
Food and Drug Administration issues
Calibration
• Other:
Facility security
Housekeeping
Sterilization
Regeneration
Radioactive material
Included in the audit is a review of the facility's vendor audit
program for hazardous waste disposal. The vendor audit, performed
yearly by designated facility individuals (e.g., hazardous waste coor-
dinator, purchasing), follows a checklist prepared by Corporate
Government and Regulatory Affairs. This checklist, 23 pages long,
includes issues such as facility description, regulatory approval,
training, safety/security, facility handling and storage procedures, spill
containment, treatment procedures (incineration, landfill), and environ-
mental monitoring. The completed checklist is returned to Government
& Regulatory Affairs for review.
AUDIT TIMING AND FREQUENCY
Millipore conducted its first four audits in the fall of 1981. Six
audits were completed during 1982, and seven audits in 1983. The basic
program design calls for audits of all U.S. manufacturing facilities and
one Regeneration facility on a yearly basis. The Regeneration Centers
are audited only after major renovations or when there is reason to
believe that potential problems exist, and not on a yearly basis. A
facility could be audited twice within a year if there appears to be a
potential problem.
At the beginning of each year the audit schedule for the year is
sent out to the two division presidents and each facility manager. One
month prior to the audit, the facility manager is reminded by telephone
of the upcoming audit.
AUDIT METHODOLOGY
Millipore's audit program has documented procedures and working
papers and is independent from the facility being audited and the
person receiving the audit report.
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The audit approach focuses primarily on two major techniques:
records /documentation review—comprising 50-60% of the auditing
efforts—and physical observation. An audit manual, which contains
checklists for each area of the audit scope, is used by the auditors.
Exhibit 1 provides a portion of an audit checklist. The full environ-
mental checklist is 13 pages long and includes 77 items. Informal
discussions are also held with facility personnel to gain a more thorough
understanding of the facility's operations and procedures.
Millipore's overall auditing procedure includes the following two
basic phases:
Phase I: Preparing for the Audit
Prior to each audit, the audit program manager collects and
reviews pertinent information on the facility (internal memos, agency
inspections, previous audits, complaints, etc.). Additional audit team
member(s) may be selected from the division or corporate staff,
depending on the size of the facility and complexity of its operations.
The facilities are notified of the audit schedule at the beginning of
the year. At least one month prior to the audit, the facility is notified
by a telephone call of the dates for the upcoming audit. Two weeks
before the actual audit, there is a pre-audit meeting with facility per-
sonnel to:
• Assure that the audit team and facility personnel understand
the objectives of the audit;
• Define the scope of the audit;
• Review compliance programs, operations manuals, previous
internal audit reports and related corrective actions, current
and proposed regulations and appropriate internal policies
relating to personnel practices, quality assurance procedures,
specifications, etc; and
• Discuss any issues of potential concern the facility manage-
ment may have.
For facilities not within geographical proximity to corporate head-
quarters, this pre-audit meeting is conducted with facility management
via telephone. During this meeting, the auditor discusses the audit
scope with facility personnel, identifies key facility personnel to
interact with during the audit, and collects needed information to
prepare the audit itinerary. The audit itinerary serves as the audit
plan and delineates the who, what, when, and where of the audit.
Exhibit 2 illustrates a portion of an audit itinerary.
Phase II: Performing the Audit
The audit commences with an orientation meeting with key facility
personnel. During this meeting, objectives of the audit are discussed,
the itinerary and audit procedure are presented, and any areas of
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EXHIBIT 1
PORTIONS OF ENVIRONMENTAL AUDIT CHECKLIST
12.26 Has the facility obtained detailed chemical and/or physical analyses
of representative waste samples for the streams? Internal?
External? Where maintained?
12.27 Have analyses been repeated when the process has changed, or when the
off-site facility indicated that the waste does not match the mani-
fest? Has this occurred? When? What?
12.28 Is there a formalized waste analysis plan (parameters for each
hazardous waste analyzed, rationale for selection, test methods for
parameters, sampling methods for obtaining representative samples,
and frequency of analysis)? What does it contain?
12.29 Who maintains the various forms, permits, and licenses?
12.30 How are these forms, permits, etc., monitored for possible
amendments and changes?
12.31 Where are hazardous waste manifest copies maintained? How monitored?
How long are they kept?
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EXHIBIT 1 (continued)
12.45 How often are personnel retrained regarding hazardous waste handling?
12.46 Are there records that document training and/or job experience?
Where?
12.47 Is there a written job description for each position (including
skill, education, and duties)? Where?
12.48 Is there a formalized hazardous waste inspection plan? What does it
consist of?
12.49 What is the procedure for conducting a hazardous waste inspection-
12.50 How often are hazardous waste inspections conducted? Documented?
12.51 What areas are subject to inspection?
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EXHIBIT 2
EXCERPTS FROM AN AUDIT ITINERARY
Date
Thursday/May 26
Friday/May 27
Monday/June 13
Wednesday/June 15
CORPORATE AUDIT -
lime
8:30
12:00
1:00
3:00
8:30
12:00
1:00
2:00
8:30
12:00
1:00
8:30
12:00
1:00
Page 3 of 5
ITINERARY
Area
Receiving
Warehouse
Lunch
Incoming Insp.
Calibration
Environmental Issues
Lunch
Environmental Issues
Radio-Active Material
Casting/Mix Room
Lunch
Casting/Mix Room
Review Product Documentation
Lunch
Product Review Documentation
Arthur D. Little, Inc.
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concern or changes to the facility are identified. The meeting is fol-
lowed by a facility tour to familiarize the audit team with the facility's
operations. The tour is followed by another meeting with the facility
audit team to go over the audit itinerary and begin the actual field
work. The audit typically takes three to five days. As shown in
Exhibit 2, it is not uncommon for the audit team to initiate the field
work one week and to complete the audit two weeks later.
Typical audit steps include:
• An evaluation of general overall operations (a review of
programs, procedures, processes, products, etc.);
• Environmental issues (records review of permits, chemical
inventory, manifests, and evaluation of compliance with writ-
ten procedures);
• Workplace/OSH A issues (documentation review of accident
reports, OSHA inspections, and compliance tour of pertinent
safety areas); and
• Good Manufacturing Practices and Quality Assurance (evalua-
tion of labeling procedures, complaint system, in-coming
inspections, calibration procedures, returned goods and recall
procedures).
At the conclusion of the audit, a formal meeting is held with
facility personnel to discuss the team's findings and observations.
ASSURING AUDIT QUALITY
Audit consistency is achieved by having the audit program man-
ager act as the team leader on all audits. A check on the program
occurs with the review of the audit report by the other audit team
members and by the Director, Government and Regulatory Affairs.
Audit effectiveness is evaluated through the encouragement of comments
and suggestions by the audited facilities directed to the Director,
Government and Regulatory Affairs, and/or to the General Counsel.
AUDIT REPORTING
Millipore's audit program manager prepares a formal written audit
report one week after the audit. The report, typically about 15 pages
long, includes four major sections:
1. Itinerary: Names of the corporate auditor(s) and the facility
team, and areas covered during each day of the audit.
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2. Summary: Two-page summary listing the highlights of the
audit.
3. Notations: One-page listing of applicable facility procedures
and guidelines.
4. Detailed Audit Observations: Audit findings listed by func-
tional scope. Each finding has four parts:
a. Specific finding
b. Responsible individual
c. Response/corrective action
d. Projected completion date
Items 4(b), (c), and (d) are prepared as "blanks" in the report
to be filled in by the facility manager after he receives the audit
report.
The audit report is addressed to the facility manager, the facility
quality assurance manager, and the facility environmental and safety
coordinator. Copies of the report go to the Vice President and General
Counsel, Director of Governmental and Regulatory Affairs, Division
Manager, and the audit team member.
In spite of the audit program's organizational relationship with the
General Counsel, no steps are currently taken to protect the audit
findings under attorney-client privilege or work-product doctrine.
Excerpts of Millipore's audit report are presented in Exhibit 3.
Follow-Up
Action plans for each audit finding are prepared by the facility
manager and incorporated into the audit report (as items 4(b), (c), and
(d) described above). These plans are prepared within two to four
weeks of the audit, and are forwarded to the audit program manager
for review.
The audit program manager follows up on significant report items
via visits or telephone within one month of the report's issuance. Less
significant report items receive follow-up during the next audit at that
facility. Any repeat observations are noted in the subsequent audit
report.
Record Retention
All audit reports, records, and documents from the audits are kept
indefinitely by the Corporate Government & Regulatory Affairs
Department.
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EXHIBIT 3
EXCERPTS FROM MILLIPORE'S AUDIT REPORT
ENVIRONMENTAL ISSUES
4. The hazardous waste Guidebook/Manual is quite thorough, however, the copy
in the solvent storage area does not contain the same revisions as the
master book.
Responsible Individual(s):
Response/Corrective Action:_
Projected Completion Date:
7. It is recommended that there be an individual within the hazardous waste
program with a varied background (i.e., chemical knowledge, able to res-
pond to emergencies, troubleshoot, etc.).
Responsible Individual(s):
Response/Corrective Action:
Projected Completion Date:_
9. Lack of a formalized waste analysis plan (i.e., parameters for each haz-
ardous waste analyzed, rationale for selection, test methods for para-
meters, sampling methods for obtaining representative samples, and fre-
quency of analysis).
Responsible Individual(s):
Response/Corrective Action:
Projected Completion Date:_
This report was prepared for purposes of this study. The comments con-
tained herein are for illustrative purposes only and do not reflect operating
situations, actual or implied.
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EXHIBIT 3 (continued)
10.
It is recommended that there be an individual to possibly look at methods
for the reduction or recycling of hazardous waste. The volume of waste,
and cost for disposal has not changed since 1981,
Responsible Individual(s): '_
Response/Corrective Action:
Projected Completion Date:
11. A formalized training program regarding hazardous waste, including the
overlap into the safety program, is needed. Regulations require that
individuals must have classroom instruction or on-the-job training, to
perform their duties properly (i.e., procedures for using, inspecting, and
repairing emergency and monitoring equipment; general handling of waste;
use of communication and alarm systems; procedures in response to spills,
fire or explosion; procedures for shut-down of operations, etc.). In
addition, individuals involved in hazardous waste management, handling,
etc., must have an annual review of previous training.
"Responsible Individual(s):
Response/Corrective Action:_
Projected Completion Date:
12. It is recommended that the current inspection plan/check-list include key
areas where waste is accumulated, and areas that may be subject to spills
(i.e., labs, passivation, solvent storage, etc.).
Responsible Individual(s):
Response /Corrective Action:_
Projected Completion Date:_
This report was prepared for purposes of this study. The comments con-
tained herein are for illustrative purposes only and do not reflect operating
situations, actual or implied.
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Arthur D. Little, Inc.
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EXHIBIT 3 (continued)
14. Lack of a formalized procedure (or available resources) in the event of
possible emergency situation regarding hazardous waste on-site.
Responsible Individual(s): '
Response/Corrective Action:
Projected Completion Date:
15. Lack of a formalized procedure for notifying appropriate state and/or
local authorities in the event of an emergency situation involving haz-
ardous waste.
Responsible Individual(s):
Response/Corrective Action:
Projected Completion Date:_
16. Previous hazardous waste vendor audit notations include information
regarding the approximate number/volume and size of containers with haz-
ardous waste; it may be worthwhile, on future audits, to review the ven-
dor's permit which states the volume permitted on-site for various cate-
gories.
Responsible Individual(s):
Response/Corrective Action:
Projected Completion Date:
This report was prepared for purposes of this study. The comments con-
tained herein are for illustrative purposes only and do not reflect operating
situations, actual or implied.
104
Arthur D. Little, Inc.
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PROGRAM BENEFITS AND DEVELOPMENTS
Millipore's Audit Program Manager sees several benefits from the
audit program. Top management views the program as providing them
with an objective assessment of the environmental status of the facility
and identifying any areas of concern. The General Counsel feels the
program is part of Millipore's "checks and balances", system which
provides reassurance that things are going on as appropriate. Envi-
ronmental management views the program as reinforcing corporate
presence and commitment to the facility while emphasizing that the
corporation cares how each facility is run.
Some major changes are 'on the horizon for Millipore's corporate
audit program. By the end of 1983, each of the two divisions is to
take over a major portion of the corporate audit program—the audit
focus relating to the facility's products and processes. The corporate
program will then focus on auditing the environmental management
systems of the two divisions.
During the fall of 1982, Millipore established a corporate occupa-
tional health and safety function. This corporate group will perform
separate audits in the areas of occupational health and safety. As a
result, the Corporate Government and Regulatory Affairs audit program
will focus more on the capability of the facility's management systems to
handle occupational health and safety activities.
105
Arthur D. Little, Inc.
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