United States
Environmental Protection Agency
Office of Enforcement and
Compliance Assurance (2248A)
EPA 300-N-99-020
AUDIT POLICY UPDATE
Volume 4, Number 2 *Special Issue* Office of Regulatory Enforcement
September 2000 (Revised)
Corporate-Wide Audit Agreements:
An Effective Approach for Companies to Improve
Environmental Compliance
The U.S. Environmental
Protection Agency (EPA)
encourages companies with
multiple facilities to take advantage of
the Agency's Audit Policy (Incentives
for Self-Policing: Discovery,
Disclosure, Correction and Prevention
of Violations, 60 Fed. Reg. 66706 (Dec.
22, 1995)) to conduct corporate-wide
audits and develop corporate-wide
compliance systems. The Audit Policy
eliminates gravity-based
penalties for companies ^^^^^^m
that voluntarily discover,
promptly disclose and
expeditiously correct
violations of federal
environmental law.
Recently, EPA and a major
manufacturer entered into a voluntary
agreement under which the
manufacturer will audit, disclose and
correct any violation of Clean Air Act
New Source Review (NSR) standards
at 40 facilities.
This agreement potentially involves
the correction of Clean Air Act
applicability determinations made years
ago by a previous owner. Without this
During the past 18
months, EPA has
negotiated corporate-
wide agreements with companies to
audit and correct violations of federal
PCB requirements at natural gas
facilities, emergency notification and
spill prevention requirements at 17
telecommunication companies, Clean
Air Act federal fuel standards at a major
airline, and Toxic Substances Control
Act (TSCA) violations at two major
chemical companies.
U.S. EPA and a major manufacturer recently entered into a
voluntary agreement under which the manufacturer will
audit, disclose and correct any violation of Clean Air Act
New Source Review (NSR) standards at 40 facilities.
for the audit, disclosures and
compliance, and provides for a
nationwide settlement at the audit's
conclusion.
This is a landmark agreement
because of the amount of resources
committed to conduct the audit and
correct violations, and the potential
environmental benefits that will result
from correction of any violations.
The audit agreement allows for the
efficiencies of analyzing
similar processes and
resolving all violations at
one time, in addition to
the benefits gained from
EPA and the company
working together to
bring 40 facilities into
compliance.
See Page 2 for
information on how to
develop an auditing
agreement with EPA.
agreement, such errors in applicability
determinations would potentially expose
the new owner to the extensive and
unpredictable costs associated with an
enforcement action. The agreement
establishes a three-year commitment by
the company to audit its facilities at a
cost of more than $2,000,000, and
highlights the value of corporate-wide
agreements in the context of
acquisitions.
The audit itself involves a detailed
review and analysis of whether any
changes at the facilities triggered NSR
requirements, including BACT/LAER
and air quality impact analysis/offsets.
The agreement establishes a schedule
Benefits of Corporate
Auditing Agreements
Corporate auditing agreements are
proving to be effective mechanisms to
resolve a broad range and number of
corporate-wide violations discovered
during environmental audits. These
agreements are an optimal compliance
tool for companies with facilities located
in more than one EPA Region to ensure
that the disclosures are processed on
the same schedule and with one point
of contact in the Agency. These
agreements allow companies to plan a
corporate-wide audit with an advanced
Continued Page 2
This newsletter can be found on the Internet at http://www.epa.gov/oeca/ore/auditupd.html
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SPECIAL ISSUE
AUDIT POLICY UPDATE
SPECIAL ISSUE
From Page 1
understanding between the company
and EPA regarding schedules for
conducting the audit and disclosing
violations beyond the current 10-day
disclosure requirement for single-
facility disclosures.
For companies, this approach
provides the opportunity to evaluate
corporate practices and environmental
compliance without the stigma of an
enforcement action, and removes the
uncertainty and cost of litigation,
attorneys' fees and sanctions for
violations. An agreement provides
companies with assurance that
violations disclosed over an extended
schedule will meet EPA's expectations
for timely disclosure. This approach
also can provide an opportunity for
companies to design and implement
practices that incorporate
environmental compliance into
corporate operations. For EPA,
corporate auditing agreements provide
an efficient and economical means of
improving and ensuring environmental
compliance.
How to Develop a
Corporate Audit
Agreement
Companies interested in conducting
an auditing agreement should contact
their EPA Regional office for the area
in which the facilities are located or, in
the case of multi-Regional facilities,
contact Leslie Jones at EPA's Office
of Regulatory Enforcement, at
(202) 564-5123 or Email:
jones.leslie@epa.gov. For companies
Corporate audit
agreements: EPA and the
company can reach mutually
acceptable terms regarding
schedules for audit
commencement and
completion, and a final
disclosure report.
unsure whether an auditing agreement
best suits their needs, they may, for a
limited time, engage in an anonymous
dialogue for the purpose of exploring
potential terms of an agreement.
Corporate auditing agreements are
designed to address potentially high-
volume disclosures. The audits
addressed in an agreement can range
from ones that address a specific
regulatory requirement to those that
involve a comprehensive multi-media
review. EPA will require that an
auditing agreement be in writing and
that the facilities to be audited be
identified. Based on the breadth and
complexity of the audit, EPA and the
company can reach mutually
acceptable terms regarding schedules
for audit commencement and
completion, and a final disclosure
report. All agreements are expected to
have a schedule for violation
corrections and to define injunctive
relief. The company and EPA can also
define in advance economic benefit for
certain violation types (where
applicable) and violations ineligible for
relief. Such definitions provide the
company with advanced knowledge of
potential statutory penalties for specific
violation types. In developing schedules
and the parameters of a corporate
auditing agreement, EPA strives to treat
competitors similarly.
In developing an auditing agreement,
EPA will coordinate with EPA Regions
to ensure that the proposed facilities are
not ineligible for the Audit Policy due
to an ongoing enforcement action or
any inspection that might occur during
the audit period. In all cases, however,
companies that are subject of a
corporate-wide investigation by EPA are
ineligible for Audit Policy relief. EPA will
coordinate an expedited and
comprehensive resolution of all
disclosures. For violations involving a
state-approved program, EPA will
notify the state of the disclosure.
EPA understands that, as with most
enforcement actions, confidentiality is
important to companies. EPA will
protect settlement discussions
associated with the audit, and findings
conducted and disclosed under an
agreement, consistent with EPA's
handling of enforcement matters and
EPA's "Confidentiality and Information
Received Under Agency's Self-
Disclosure Policy" (1997). Typically,
disclosures and related documents are
withheld from public release until such
time as the Agency and the self-
discloser have formally settled the case.
Seepage 3 for a list of Audit Policy
information documents found on
EPA's Website.
AUDIT POLICY UPDATE
The Audit Policy Update is published periodically for the Assistant Administrator for Enforcement and Compliance
Assurance by the Office of Regulatory Enforcement. The newsletter is intended to provide information to the public and
regulated communities regarding developments under the EPA Audit Policy. Editor: Virginia Bueno, (202) 564-8684. Email:
bueno.virginia@epa.gov. Co-Editor: Leslie A. Jones, (202), 564-5123; Email: jones.leslie@epa.gov. Change of addresser
subscription requests should be sent to the editor. Reproduction and wide dissemination of the newsletter is highly
encouraged.
SEPTEMBER 2000
Page 2
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SPECIAL ISSUE
AUDIT POLICY UPDATE
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Audit Policy Internet Resources
Audit Policy Support Documents
http://www.epa.gov/oeca/ore/apolguid.html
Audit Policy: Incentives for Self-Policing
http://www.epa.gov/oeca/auditpol.html
Audit Policy Interpretive Guidance (Questions and Answers)
http://www.epa.gov/oeca/audpolguid.pdf
'Audit Policy Update' (Newsletter)
http://www.epa.gov/oeca/ore/auditupd.html
Confidentiality of Information Received Under Agency's Self-Disclosure
Policy
http://www.epa.gov/oeca/sahmemo.html
Memorandum-Subject: Implementation of the Environmental Protection
Agency's Self-Policing Policy for Disclosures Involving Potential Criminal
Violations
http://www.epa.gov/oeca/oceft/audpol2.html
Policy on Compliance Incentives For Small Businesses
http://www.epa.gov/oeca/smbusi.html
Memorandum-Subject: Reduced Penalties for Disclosures of Certain
Clean Air Act Violations
http://www.epa.gov/oeca/ore/caa-tit.pdf
Optional Form for Disclosure Submittal
http://www.epa.gov/oeca/ore/checklist.pdf
Audit Policy Evaluation
http://www.epa.gov/oeca/oppa/ape.htm
'Enforcement Alert' (Newsletter)
http://www.epa.gov/oeca/ore/enfalert
SEPTEMBER 2000
Page 3
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United States
Environmental Protection Agency
Office of Regulatory Enforcement
(2248A)
Washington, D.C. 20460
Official Business
Penalty for Private Use $300
Audit Policy Update
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