United States Office jf the Jnsoector Genera! September 1383
Environmentai Protection 401 M Street. S.W.
Agency Washington. DC 20460
&EPA " Report of Audit
E1
Capping Report on The
Computation, Negotiation,
Mitigation, and Assessment
of Penalties Under EPA Programs
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TABLE OF CONTENTS
SCOPE AND OBJECTIVES 1
SUMMARY OF FINDINGS 4
ACTION REQUIRED 7
BACKGROUND 8
FINDINGS AND RECOMMENDATIONS 12
1. EPA NEEDS TO FULLY COMPLY WITH ITS
ENFORCEMENT PENALTY POLICY 12
2. PENALTY INFORMATION NEEDS TO BE PART
OF EPA'S STRATEGIC PLANNING AND
MANAGEMENT SYSTEM REPORT 29
EXHIBITS
1. SUMMARY OF ISSUED REPORTS 34
2. CASE SUMMARY EXAMPLES 43
3. CWA QUICK LOOK REPORT 49
4. RCRA QUICK LOOK REPORT 50
5. CAA QUICK LOOK REPORT 51
APPENDICES
1. OFFICE OF ENFORCEMENT AND COMPLIANCE
MONITORING REPLY TO OIG DRAFT REPORT ... 52
2. OFFICE OF POLICY, PLANNING, AND
EVALUATION REPLY TO OIG DRAFT REPORT ... 58
3. DISTRIBUTION 60
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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. Z0460
SEP 27 1989
OFFICE OF
THE INSPECTOR GENERAL.
Subject: Audit Report No. E1G8E9-05-0087-9100485
Capping Report on the Computation, Negotiation,
Mitigation, and Assessmet of.Penalties Under EPA
Programs
FROM:
TO:
,est E. Bradley I,'
distant Inspector General for Ai
it
Edward E. Reich
Acting Assistant Administrator for Enforcement
and Compliance Monitoring
SCOPE AND OBJECTIVES
We have prepared a "capping" report summarizing previously issued
audit reports regarding the computation, negotiation, mitigation,
and assessment of penalties under EPA programs. This "capping11
report primarily covers the Clean Air Act (CAA), the Clean Water
Act (CWA), and the Resource Conservation and Recovery Act (RCRA).
The report was prepared to apprise senior EPA management of the
recurring problems identified in our individual regional audit
reports, and to recommend action or policy changes at the
Headquarters level to alleviate similar problems in the future.
The objectives of our reviews were to report on:
l. Whether sufficient controls have been established over
the computation, negotiation, mitigation, and assessment
of penalties in EPA programs.
2. Whether the regions are operating within these
established controls.
In developing our findings and recommendations, we used and
relied on prior audit results contained in the issued audit
reports listed below. Some of these report results are also
discussed in this "capping" report. The audit results pertain to
(1) violations of media specific programs and (2) the
computation, negotiation, mitigation, and assessment of
penalties. We used this data in conjunction with our field work
to help develop our findings. Appropriate issues contained in
the reports are summarized in Exhibit 1.
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Office of Mobile Sources' Establishment,
Mitigation, and Collection of Penalties
(E1G16-05-0058-61560), September 1986
Region 5's stationary Sources of Air Pollution
Compliance and Enforcement Program
(E1K67-05-0449-80743), March 1988
Consolidated Report on EPA1? Administration
of the Asbestos National Emission Standard
for Hazardous Air Pollutants (NESHAP)
(E1GM7-05-0571-80821), March 1988
Non-Community Water System Program
(E1HW7-03-0171-81928), September 1988
Region 5's National Pollutant Discharge
Elimination System Permit Enforcement Program
(E1H2D8-05-0293-9100164), January 1989
Report of Region 4's National Pollutant
Discharge Elimination system Permit
Enforcement Program
(E1HWD8-04-0207-9100462), September 1989
Report on National Pollutant Discharge Elimination
System Permit Enforcement Program in Region 2
(E1HW8-02-0133-9100476), September 1989
Report of Region 9's Administration of the
State of Hawaii's Grant Programs for Fiscal I
years 1986 through 1988 I
(E1F58-09-0184-9100446), August 1989
Consolidated Report on Review of EPA's
Controls Over Administrative Penalties Under
the RCRA Enforcement Program
(E1G68-09-0188-9100479), September 1989
GAO Report—Hazardous Waste...Many
Enforcement Actions Do Not Meet EPA
Standards (GAO/RCED-88-140), June 1988
GAO Report—Inland Oil spills...Stronger Regulation and
Enforcement Needed to Avoid Future incidents
(GAO/RCED-89-65), February 1989
The audits listed above and summarized in this report were issued
by our audit office and the U.S. General Accounting Office and
were performed in accordance with the Standards for Audit ^af
Governmental Organizations. Programs. Activities and Functions
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issued by the Comptroller General of the United States. This
"capping" report represents a summarization of the findings
contained in these reports.
The cases covered in our issued reports were judgmentally
selected from various media program universes. We tended to
select large dollar amount cases for further evaluation. Thus,
statistical projections cannot be made of the remaining cases in
the universe. However, while our findings cannot be
statistically inferred to the larger universe of all penalty
cases, our samples were sufficient to satisfy our audit
objectives.
Our review also covered penalty assessment activities for a
number of closed cases from the Clean Air and Clean Water
programs in Regions 6, 7, and 9. Penalties for these cases were
initiated and negotiated during FY 1986 through FY 1988. We did
not issue reports on these reviews, but did discuss the details
with appropriate regional officials.
We performed the review in accordance with the Government
Auditing Standards issued by the Comptroller General of the
United States (1988 revision). Fieldwork was conducted from
September 24, 1988 through July 13, 1989. We reviewed reports,
policies and procedures, regional files, and held discussions
with regional and Headquarters enforcement officials to determine
the extent of guidance, training, and supervision provided over
the negotiation process.
Some of the major internal controls in place relative to the
setting and negotiation of civil judicial and administrative
penalties under the media programs include:
1. Uniform Civil Penalty Policy (February 1984).
2. Agencywide Compliance and Enforcement Strategy and
Strategy Framework for EPA Compliance Programs (May
1984).
3. RCRA Civil Penalty Policy (May 1984)
4. CAA Civil Penalty Policy (September 1984, Revised March
1987)
5. CWA Civil Penalty Policy (February 1986)
6. Quick Look Reports.
Our review did not include an evaluation of the internal controls
associated with the input and processing of information into
automated records systems, although we did use information
contained in these records.
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Significant instances of noncompliance with applicable Agency
policies and procedures were detailed in the issued reports and
some examples are included in this report. No other issues came
to our attention which were significant enough to warrant
expanding the scope of our review.
The Office of Enforcement and Compliance Monitoring (OECM) and
the Office of Policy, Planning, and Evaluation (OPPE) comments
and actions taken or planned in response to our findings are
discussed in the body of this report. Also, their formal
comments dated August 31 and September 1, 1989, to our draft
report are attached as appendices to this report. Their actions,
if properly implemented, will substantially correct the
deficiencies found during our review. We are recommending that
the OECM Acting Assistant Administrator ensure that the planned
corrective actions are completed.
SUMMARY OF FINDINGS
The Agency needs to take more assertive actions to fully meet the
Administrator's goals. These actions include (1) the computation
and recovery of economic benefits which violators receive from
not complying with EPA's regulations; (2) fully documenting the
rationale for reducing calculated penalties; (3) increased
reporting and oversight of states1 enforcement actions; and (4)
inserting penalty results of concluded cases in EPA's Strategic
Planning and Management System.
EPA Administrators have continually advocated a position of
strong enforcement of EPA regulations. In the 1987 Agency
Guidance Document, the Administrator stated: NMy goal is to
ensure a strong enforcement presence in all our Agency programs.
It is extremely important that we maintain a vigorous enforcement
and compliance program which is fully integrated into each media
program and which addresses localized environmental problems."
In 1988 he further stated: "We will enforce environmental laws
vigorously, consistently, and equitably to achieve the greatest
possible environmental results."
In February 1989 Administrator Reilly set Agency goals to
"vigorously" enforce air, water, and waste-disposal laws.
Polluters, he stated, "are not going to get away with it" and has
pledged to seek stiffer fines. He believes that the heart of the
integrity of EPA is vigorous and energetic enforcement.
Enforcement, he feels, will help EPA to do the job in the short
run that is expected of it by the statutes it administers.
Enforcement will also improve the climate for voluntary
compliance if people know that EPA means business as enforcers.
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1. EPA Needs To Fully Comply With Its Enforcement Penalty
Policy
Appropriate penalties were either not calculated and assessed at
all, or inadequately calculated. Also, calculated penalties were
reduced during negotiations, in some cases in excess of 90
percent and amounting to millions of dollars, with little or no
documentation to support the reductions. In many cases the
financial benefits the violators received from delayed or avoided
costs were not recovered.
Inadequate calculation of penalties and insufficient
documentation to support penalty reductions greatly raises the
potential for fraud or abuse in EPA's penalty program. Also,
GAO's standards for internal control systems, which require that
all transactions and events be clearly documented and the
documentation available and easily accessible for examination,
were not met. In addition, the Agency did not obtain maximum
deterrence and fair and equitable treatment of the regulated
community in all cases. These violators may have gained an
economic and competitive advantage over those who complied with
the Agency's regulations.
Generally, the above condition exists because of a lack of
attention by Agency personnel to fully complying with the Clean
Water Act (CWA), the Resource Conservation and Recovery Act
(RCRA), or the Clean Air Act (CAA) civil penalty policies in all
cases. For example:
A prime contractor and subcontractor were cited for failure
to (a) provide notification of intent to remove asbestos-
containing material, (b) wet asbestos-containing material
prior to removal, and (c) store asbestos-containing material
in sealed, labeled, leak-tight containers (the material was
dumped into an open-bodied truck). However, a penalty was
not computed nor assessed for these major violations.
A region computed an economic benefit of $342,000 for a CAA
violation. This amount was included in the litigation
report. Subsequently, the region recomputed the economic
benefit as $12,091 (a 96 percent reduction). The region
had no documentation, nor could it satisfactorily explain
to us how the $329,909 ($342,000 - $12,091) deduction was
determined.
In addition, the U.S. General Accounting Office (GAO) reported in
its June 1988 report on "Many Enforcement Actions Do Not Meet EPA
Standards" that penalties assessed may not be large enough to
offset economic benefits of noncompliance. GAO could not
determine whether the three EPA regions covered in its review
assessed penalties as prescribed by the RCRA penalty policy
because of the lack of documentation in the files. GAO reviewed
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31 enforcement cases and found only 2 cases in which it could
verify that the economic benefit was calculated in accordance
with the penalty policy.
GAO also reported in its February 1989 report on "inland Oil
Spills—Stronger Regulation and Enforcement Needed to Avoid
Future Incidents", that overall, fines were rarely used. In
fact, seven of the ten regions had never issued penalties even
though they had found violations of the regulations.
The Agency, in assessing penalties, had not complied with either
the letter or intent of the various penalty policies in all
cases. Thus, EPA's goals of deterrence and fair and equitable
treatment of the regulated community may not have been fully met.
Moreover, allowing a violator to benefit from noncompliance
punishes those who have complied by placing them at an economic
and competitive disadvantage. This, in effect, creates a
powerful disincentive for compliance. The Agency needs to make a
stronger commitment to the implementation of the penalty policies
in all cases.
In some cases our issued reports covered state activities related
to the computation, negotiation, mitigation, and assessment of
penalties. To a large degree, we found that states were not
properly administering either EPA's or their own penalty policies
for the cases we reviewed.
The Acting Assistant Administrator for OECM substantially agreed
with our draft report recommendations that his office and media
program Assistant Administrators reemphasize to Agency personnel
the need to adhere fully to media program penalty policies. He
also agreed to a more aggressive oversight of regional
activities. He believes this can best be accomplished through
expanding the existing media program oversight audits conducted
periodically by each program office with his office's
participation.
We are recommending that the Acting Assistant Administrator for
OECM ensure that the planned corrective actions are completed.
2. Penalty Information Needs To Be Part Of EPA'S Strategic
Planning And Management System Report
EPA information on civil, judicial, and administrative penalties
was not part of the Strategic Planning and Management System
Report (SPMS). Nor was penalty information aggregated by the
Agency in such a fashion to make it useful in reviewing all of
the various issues and concerns associated with the negotiation
and assessment of penalties against violators. For example, EPA
statistics did not capture the penalties computed and the
millions of dollars mitigated by EPA and DOJ negotiators. As a
result, senior management cannot adequately judge the success of
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the program nor fully identify those areas needing improvement in
the computation, negotiation, mitigation, and assessment of
penalties.
A measure of the effectiveness of EPA's enforcement program is
the percentage of the regulated community in compliance with
EPA's regulations. Likewise, a measure of EPA's enforcement
effectiveness is the action taken and penalties assessed against
those relatively few concerns which do not comply with EPA
regulations. It is EPA policy to hit these non-compilers hard
with high dollar penalties. The success in bringing them into
compliance is an additional benefit of EPA's enforcement policy.
EPA's SPMS report does not capture the effectiveness of its
enforcement program. Generally, SPMS only shows the status of
total cases; nothing is shown regarding penalties.
We recommended in our draft report that OECM implement a SPMS
reporting requirement to include the penalty results of concluded
cases by media program. SPMS should show computed penalties,
reductions by EPA staff, reductions by Department of Justice
(DOJ) and EPA attorneys, and the final collected amounts.
The OECM Acting Assistant Administrator believed that requiring
the information outlined in our recommendation would result in a
significant workload increase. The Assistant Administrator for
OPPE would rather use our specific recommendation as part of
OECM's management of the Agency's penalty program(s) rather than
incorporating such specific details in SPMS.
The information we are asking for, as contained in our
recommendation, is already supposed to be produced via the
penalty negotiation process; thus, we do not see a major increase
in workload.
We are recommending that the OECM Acting Assistant Administrator
coordinate with the OPPE Assistant Administrator to assure that
Federal penalty results of concluded cases by media programs are
accumulated. The data should show computed penalties, reductions
by Agency staff, reductions by DOJ and Agency staff, and the
final assessed amounts. A decision by appropriate officials can
be made at a later date as to whether the data should be made
part of SPMS.
ACTION REQUIRED
In accordance with EPA Order 2750, the action official is
required to provide this office a written response to the audit
report within 90 days of the audit report date.
We have no objection to the further release of this report at
your discretion.
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BACKGROUND
EPA is responsible for the administration of environmental
statutes mandated by Congress. These administrative
responsibilities include: the establishment of compliance
standards and permits; the monitoring and reporting of
compliance; the establishment of strategies for accomplishing
compliance; and the actual methods of enforcing compliance.
EPA's enforcement goal is to achieve compliance with
environmental laws, regulations and program requirements. One
essential element of an enforcement program is the effective use
of civil and administrative penalties which punishes the
violators and deters future violations. The effectiveness of the
enforcement program is measured by the rate of compliance with
program goals. The assessment of penalties that are sufficiently
burdensome is a critical tool in reaching compliance in a timely
manner.
Civil penalties play an important role in an effective
enforcement program. Deterrence of noncompliance is achieved
through: (1) the perceived likelihood of detecting a violation;
(2) the speed of the enforcement response; and (3) the likelihood
and severity of the penalty. While penalties are the critical
third element in creating deterrence, they can also contribute to
greater equity among the regulated community by recovering the
economic benefit a violator gains from noncompliance over those
who do comply.
The Clean Water Act fCWAl
The Rivers and Harbors Act of 1899 was the first Federal
legislation covering water pollution. Fifty-seven years later,
Congress enacted the 1956 Federal Water Pollution Control Act
(FWPCA), under Public Law (PL) 84-660. FWPCA made Federal grant
funds available for the planning, design, and construction of
wastewater treatment facilities. The Department of Health,
Education and Welfare administered the construction grant program
until 1966 when it was transferred to the Department of Interior.
The construction grant program was subsequently transferred to
the Environmental Protection Agency (EPA) in 1970.
In 1972, the FWPCA was amended and gave way to the CWA, PL 92-
500. This resulted in extensive changes to the construction
grant program. In addition, the 1972 amendments mandated a
strong enforcement program, state and area-wide planning, and the
issuance of discharge permits based on approved water quality
standards or stringent technology-based effluent limits for all
dischargers.
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The National Pollution Discharge Elimination System (NPDES)
permit establishes the discharge limits which are used to measure
compliance with CWA. The CWA required increasingly stringent
technology-based effluent limitations for industrial users which
are established in the National Effluent Guidelines, 40 CFR 400.
For publicly-owned treatment works (POTW), the CWA required
secondary treatment limits, or any additional treatment levels
necessary to protect water quality, based on effluent limits
required to meet the State's Water Quality Standards.
NPDES permits are issued to all point source discharges, which
are those POTWs and industrial facilities which discharge
directly into navigable waters. Facilities are classified as
either major or minor depending on the volume or effluent
discharged. Permits require monitoring by the permittee to
verify compliance with the effluent limits. A Discharge
Monitoring Report (DMR) is usually submitted monthly by the
permittee to the administering agency. The DMR is reviewed to
determine the permittee's compliance or noncompliance with the
permit. Title 40 CFR 123.45 requires administering agencies to
report the compliance status of facilities with NPDES permits in
Quarterly Noncompliance Reports. The regulations provide
criteria for the types of violations that are to be reported in
the Reports. Also, any violation or instance of noncompliance is
subject to enforcement action.
The CWA includes administrative, civil, and criminal enforcement
remedies for noncompliance. EPA can sue civilly in court for
$25,000 per day per violation, as well as injunctive relief under
Section 309(d) of the Act, or seek criminal penalties under
Section 309(c). Administratively, EPA can issue an
administrative compliance order to the violator under Section
309(a) of the Act. The 1987 amendments to the CWA gave EPA the
ability to assess penalties administratively. Under Section
309(g) of the Act, the EPA Administrator can impose civil
penalties of up to $125,000 for noncompliance with program
requirements.
The Resource Conservation and Recovery Act (RCRA1
RCRA was passed as Public Law 94-580, an amendment to the Solid
Waste Disposal Act, on October 21, 1976. Congress1 overriding
purpose in enacting RCRA was to establish the statutory framework
for a national system that would ensure the proper management of
hazardous waste. Regulation of these materials was intended to
prevent future hazardous waste problems and reduce threats to the
public health and the environment. RCRA was amended in 1980 and
1984 increasing EPA's enforcement authorities and substantially
increasing the implementing requirements for the regulated
community. Section 3008 of RCRA gives the EPA Administrator the
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authority to assess civil penalties of up to $25,000 per day per
violation for noncompliance with program requirements or with an
order.
The Clean Air Act
Since the mid-1950 's, the nation has maintained a commitment to
protecting the environment and public health from the adverse
effects of air pollution. This commitment is important because
air pollution, brought about by urbanization, industrial
development, and the increasing use of motor vehicles, has
resulted in mounting dangers to the public health and welfare.
Direct sources of air pollution are generally categorized as
either stationary or mobile. Stationary sources include
factories, power plants, and smelters, while mobile sources
include automobiles, buses, and trucks. Some facilities, like
highways and shopping centers, are called indirect sources
because they attract mobile sources of pollution. This report
only focuses on cases dealing with stationary sources of
pollution and the related assessed fines.
Congress enacted the CAA in 1963, under PL 88-206, as the basic
statute governing the nation's effort to protect the public
health and welfare from the harmful effects of air pollution.
The CAA was substantially amended in 1970 and 1977. The CAA
requires both EPA and state and local governments to assume
responsibility for the implementation of measures for prevention
and control of air pollution at its source. EPA establishes air
quality standards, conducts research, and provides technical and
financial assistance to state and local governments. States are
responsible for developing plans describing how they will control
pollutant emissions from stationary sources in order to meet and
maintain air quality standards.
The CAA includes administrative, civil, and criminal enforcement
remedies to correct instances of noncompliance. EPA can
administratively issue a notice of violation and assess a civil
penalty. Civil relief may take the form of an injunction
requiring compliance with applicable regulations. Significant
monetary penalties may also be assessed with civil relief
measures. Section 113 (b) of the Act authorizes the EPA
Administrator to assess penalties of up to $25,000 per day per
violation for noncompliance with program requirements.
civil Penalty Policy
In February 1984, EPA issued the Uniform Civil Penalty Policy.
It established a consistent agency-wide approach to the
assessment of civil penalties. This policy established a single
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set of goals for penalty assessment in administrative and
judicial enforcement actions. These goals, which are
incorporated in current program specific policies, are:
deterrence;
fair and equitable treatment of the regulated
community; and
swift resolution of environmental problems.
The first and primary goal of penalty assessment is deterrence.
A penalty should provide specific deterrence by persuading a
violator to take all necessary precautions against falling into
noncompliance a second time; and it should engender general
deterrence among the regulated community, i.e., dissuading others
from violating the law.
The second goal is fair and equitable treatment of the regulated
community. This requires that penalties be consistent and
flexible. Consistent because otherwise penalties will be seen as
arbitrary and violators will vigorously defend themselves and
tie-up scarce EPA resources, and flexible so that adjustments to
reflect legitimate differences between similar violations can be
made.
The third goal is the swift resolution of environmental problems.
The primary mission of EPA is to protect the environment
including the public health.
The establishment of an agency-wide general penalty policy
eventually led to the issuance of program specific penalty
policies. In May 1984, the Office of Solid Waste issued the RCRA
Civil Penalty Policy. In September 1984, the Office of Air and
Radiation issued its initial CAA Civil Penalty Policy, which was
revised in March 1987. The Office of Water, which issued a
general principles policy in 1980, formulated its program
specific CWA Civil Penalty Policy in February 1986.
The above documents set forth the Agency's policy for assessing
penalties under their respective programs. The purpose of the
policies is to assure that: (1) persons are deterred from
committing violations; (2) penalties are appropriate for the
gravity of the violations committed; (3) economic incentives for
noncompliance are eliminated; (4) penalties are assessed in a
fair and consistent manner; and (5) compliance is achieved.
This system of penalty assessment adheres to the Agency policy by
requiring: (1) calculation of a preliminary deterrence amount
consisting of a gravity component; (2) determination of the
economic benefits of noncompliance; and (3) application of
adjustment factors within specified boundaries to account for
differences between cases.
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FINDINGS AND RECOMMENDATIONS
FINDING NO. 1- EPA NEEDS TO FULLY COMPLY WITH ITS ENFORCEMENT
PENALTY POLICY
Appropriate penalties were either not calculated and assessed at
all, or inadequately calculated. Also, calculated penalties were
reduced during negotiations, in some cases in excess of 90
percent and amounting to millions of dollars, with little or no
documentation to support the reductions. In many cases the
financial benefits the violators received from delayed or avoided
costs were not recovered.
Inadequate calculation of penalties and insufficient
documentation to support penalty reductions greatly raises the
potential for fraud or abuse in EPA's penalty program. Also,
GAO's standards for internal controls systems, which require that
all transactions and events be clearly documented and the
documentation available and easily accessible for examination,
were not met. In addition, the Agency did not obtain maximum
deterrence and fair and equitable treatment of the regulated
community in all cases. These violators gained an economic and
competitive advantage over those who complied with the Agency's
regulations.
Generally, the above condition exists because of a lack of
attention by Agency personnel to fully complying with the Clean
Water Act (CWA), the Resource Conservation and Recovery Act
(RCRA), or the Clean Air Act (CAA) civil penalty policies in all
cases. For example:
• A prime contractor and subcontractor were cited for failure
to (1) provide notification of intent to remove asbestos-
containing material, (2) wet asbestos-containing material
prior to removal, and (3) store asbestos-containing material
in sealed, labeled, leak-tight containers (the material was
dumped into an open-bodied truck). However, a penalty was
not computed nor assessed for these major violations. (EPA
Audit Report No. E1GM7-05-0571-80821)
While reducing the proposed penalty of $500,000 down to
$75,000 (an 85 percent reduction), the region did not
document its basis for the reduction. In fact, the region
requested and received an Administrative Law Judge (ALT)
ruling that held the company liable for the complaint facts
supporting the proposed penalty. However, our discussions
with regional program personnel indicated that they did not
expect to pursue the full proposed penalty during settlement
negotiations. In part, they were concerned that, even with
the ruling, the ALJ would not support the region's desired
penalty and would only allow a penalty of $10,000. The
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region's desired or target penalty was established at
$100,000, or 20 percent of the proposed penalty. The basis
for the desired penalty was not documented in the region's
records. He found no evidence to substantiate the region's
concern about the ALJ not supporting them in adjudicating
the case.
We noted that the region's proposed penalty of $500,000
was a reduction from its first penalty calculation of
$6,885,000. The first penalty calculation considered
306 days of violations. The region's justification for
the reduction to $500,000 was "to account for any
efforts made by the company and to reflect the civil
penalty policy concerns with deterrence and fair and
equitable treatment of the regulated community". We
found little evidence of self-initiated efforts by the
company to substantiate this significant pre-complaint
reduction.
The final penalty of $75,000 represented only 1 percent
of the original pre-complaint calculated penalty and
only 15 percent of the proposed penalty. (EPA Audit
Report No. E1G68-09-0188-9100479)
A region computed an economic benefit of $342,000 for a CAA
violation. This amount was included in the litigation
report. Subsequently, the region recomputed the economic
benefit as $12,091 (a 96 percent reduction). The region
had no documentation, nor could it satisfactorily explain
to us how the $329,909 ($342,000 - $12,091) deduction was
determined. (EPA Audit Report No. E1K67-05-0449-80743)
In addition, the U.S. General Accounting Office (GAO) reported in
its June 1988 report on "Many Enforcement Actions Do Not Meet EPA
Standards" that penalties assessed may not be large enough to
offset economic benefits of noncompliance. GAO could not
determine whether the three EPA regions covered in its review
assessed penalties as prescribed by the RCRA penalty policy
because of the lack of documentation in the files. GAO reviewed
31 enforcement cases and found only 2 cases in which it could
verify that the economic benefit was calculated in accordance
with the penalty policy.
GAO also reported in its February 1989 report on "Inland Oil
Spills—Stronger Regulation and Enforcement Needed to Avoid
Future Incidents," that overall, fines were rarely used. In
fact, seven of the ten regions had never issued penalties even
though they had found violations of the regulations.
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The Agency, in assessing penalties, had not complied with either
the letter or intent of the various penalty policies in all
cases. Thus, EPA's goals of deterrence and fair and equitable
treatment of the regulated community were not fully met.
Moreover, allowing a violator to benefit from noncompliance
punishes those who have complied by placing them at an economic
and competitive disadvantage. This, in effect, creates a
powerful disincentive for compliance. The Agency needs to make a
stronger commitment to the implementation of the penalty policies
in all cases.
In some cases our issued reports covered state activities related
to the computation, negotiation, mitigation, and assessment of
penalties. To a large degree, we found that states were not
properly administering either EPA's or their own penalty policies
for the cases we reviewed.
Penalties Need To Be Calculated
EPA's General Enforcement Policy, dated February 1984,
establishes a single set of goals for penalty assessment in
administrative and judicial enforcement actions:
deterrence;
fair and equitable treatment of the regulated community; and
swift resolution of environmental problems.
The most important mechanisms for achieving consistency are the
systematic methods for calculating the economic benefit component
(i.e., the financial benefit the violator received from delayed
or avoided costs) and the gravity component (which reflects the
actual or potential harm to the environment, importance of the
regulatory scheme, and the size of the violator) of the penalty.
If the Agency is to promote consistency, it is essential that
penalties be calculated and each case file contain a complete
description of how each penalty was developed.
The following examples taken from our issued reports and our
field work show a lack of computation of a penalty amount and
assessment of a penalty, or an insufficient penalty calculation
for major violations of EPA regulations.
• A region issued a Finding of Violation to a contractor
citing failure to provide notice of renovation operations,
including asbestos material, and removal of friable asbestos
material in a manner that broke up the friable asbestos
material. This finding resulted from an EPA inspector's
observation of the renovation process. His inspection
report stated, "Ceiling of most rooms pulled down to expose
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HVAC ducting. Asbestos laden materials in piles on floor.
High dust levels. Workmen left door open for ventilation
while they were working. No respiratory protection used."
In this instance not only the workers, but the general
public was exposed to asbestos fibers. The region's
enforcement action was limited to an Administrative Order
requiring the contractor to comply with asbestos NESHAP
regulations in the future. Based on the guidance in the
Asbestos Demolition and Renovation Civil Penalty Policy, a
penalty of $37,000 would have been appropriate. (EPA Audit
Report No. E1GM7-05-0571-80821)
There was no documentation in the region's files that it had
estimated the economic benefits of noncompliance in three of
the four cases we reviewed. For example, the region filed a
complaint against a company which included 18 RCRA
violations. The complaint included a variety of RCRA
violations including: ignitable waste operating practice
violations, failure to prepare and submit various plans and
records, no financial assurance for closure or accidental
occurrences, and no groundwater monitoring. We found no
evidence that the region had calculated the estimated
economic benefits. For the types of violations cited in the
complaint, it is reasonable to expect that the company
substantially benefited from avoiding the costs of
compliance with the groundwater monitoring and financial
assurance requirements. (EPA Draft Audit Report No. E1G68-
09-0188)
In addition, GAO reported in its June 1988 report on "Hazardous
Waste...Many Enforcement Actions Do Not Meet EPA Standards" that
penalties assessed may not be large enough to offset the economic
benefits of noncompliance. GAO could not determine whether the
three EPA regions covered in its review assessed penalties as
prescribed by the RCRA penalty policy because of the lack of
documentation in the files. GAO reviewed 31 enforcement cases
and found only 2 cases in which it could verify that the economic
benefit was calculated in accordance with the penalty policy.
For the remaining 29 cases GAO found:
The economic benefit was not shown in the penalty
calculation of 15 cases.
Documentation was not available on the penalty
calculation for 5 cases.
The economic benefit calculation was not considered
necessary by the GAO reviewers in 9 cases.
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The EPA Office of Waste Programs Enforcement responded to GAO's
finding. Among the corrective actions planned was:
Reemphasis of the importance of adequate documentation
of penalty calculation.
The development of a manual that includes computer
tracking and regular supervisory review of active
cases.
Training on developing administrative records.
Focus on the quality of case files during bi-annual
reviews of regions, including penalty calculations.
In addition, GAO issued a report, "Inland Oil Spills—Stronger
Regulation and Enforcement Needed to Avoid Future Incidents" in
February 1989. The CWA authorizes fines of up to $5,000 per day
for each violation of EPA's Oil Pollution Prevention regulations.
GAO reported that there is no national guidance on the imposition
of fines and the regional offices have adopted inconsistent
policies. GAO further reported that overall, fines were rarely
used, although EPA's data indicate that the rate of noncompliance
with the regulations may be high. In fact, seven of the ten EPA
regions had never issued penalties even though they had found
violations of the regulations. Among the GAO recommendations was
that EPA establish a policy for fining violators.
Need To Fully Justify Reduction To Penalty Calculations
A major objective of the various penalty policies is to negate
the "economic incentives for noncompliance". This is
accomplished by calculating a component for the economic benefits
of noncompliance, and adding to it a gravity-based penalty
component. Thus, it shields the economic benefits component from
any mitigating adjustments during negotiations of the final
penalty. If a penalty is to achieve deterrence, both the
violator and the general public must be convinced that the
penalty negates the violator's enhanced position relative to
those who have complied in a timely fashion.
The various media penalty policies require that when the assessed
penalty fails to remove the economic benefit, the case
development team must explain in the case file why it failed to
do so. The policies also provide that documentation for
deviations from the program-specific guidance should be contained
in both the case file and in any memoranda that accompanies the
settlement. This point was reiterated in a joint Region 5
memorandum issued by the Regional Counsel and the Director of the
Water Division to the Air, Water, Toxic, and General Law Branch
staff and the Water Division Technical Enforcement staff, on
"Revisions of Bottom Line Penalties in Water Cases". The
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memorandum stated that, when a consensus was reached on revisions
to a penalty amount, the rationale for the decision should be
covered in a memorandum to the Assistant Administrators for OECM
and Water. The clear intention of these policies is to make the
negation of the violator's economic benefits the primary focus of
the penalty process.
The various penalty policies provide guidelines within which
enforcement personnel may mitigate penalties. The adjustments
usually apply to the gravity-based penalty component and not to
the economic benefit component. The intent of this limitation is
to shelter at least for most typical cases, the economic benefit
component from the negotiations to ensure that the violator gains
no competitive advantages from the noncompliance. The various
program specific policies include the acceptable justifications
for mitigating penalties as: (1) good faith efforts to comply;
(2) degree of willfulness or negligence; (3) history of
noncompliance; (4) financial ability to pay; and (5) other unique
factors.
Each media penalty policy has its own parameters for adjustments
to the gravity-based component. For the CWA program there are
three suggested ranges of adjustment:
0 to 20%: within the absolute discretion of the
litigation team;
20 to 30%: only appropriate in unusual circumstances;
and
30% plus: only appropriate in rare circumstances.
The two suggested ranges of adjustments for the RCRA program are:
0 to 25%: within the absolute discretion of the
litigation team; and
26 to 40%: only appropriate in unusual circumstances.
For the CAA program the three suggested ranges of adjustment are:
0 to 30%: within the absolute discretion of the
litigation team;
31 to 50%: only appropriate in unusual circumstances;
50% plus: only appropriate in rare circumstances.
The mitigation or adjustment of penalties must be documented and
is appropriate only to the extent that the violator clearly
demonstrates an entitlement to the adjustment. The burden of
proof rests sguarely upon the violator. Without such proof the
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various penalty policies prohibit enforcement personnel from
making any mitigating adjustments to the calculated penalty
amount. The Clean Water Act policy, however, allows use of
"litigation considerations" that are not limited and do not put
the burden of proof on the violator.
The following examples taken from our issued reports show a lack
of documentation for significantly reducing computed penalties.
Additional examples are in Exhibit 2.
Clean Water Act Case (EPA Audit Report No. E1HWD8-04-0207-
9100462)
The city was one of the region's worst violators. The
region computed a penalty of $3,684,360 consisting of a
$614,060 recalcitrance figure, an economic benefit figure of
$574,300, and a gravity-based component of $2,496,000.
Citing litigation considerations of $2,947,488 and ability
to pay considerations of $700,028, the region computed a
settlement amount of $36,844. There was no support to show
the method used to arrive at the litigation consideration
figure ($2,947,488). It seemed to be an arbitrarily arrived
at figure designed to reduce the amount recommended for the
penalty. The case remained unresolved at the close of our
audit work and the facility remained in non-compliance.
Resource Conservation and Recovery Act Case (EPA Audit Report
No. E1G68-09-0188-9100479)
The negotiators reduced the proposed penalties of $2,488,775
down to $90,000 or a reduction of 96 percent. The proposed
penalties included $2,425,000 ($25,000 per day for 97 days)
for operating a hazardous waste surface impoundment without
a permit or interim status, and $63,775. for several other
counts including inadequate liability coverage and illegal
international shipments of hazardous waste.
Regional negotiators offered to reduce the penalty from
$25,000 per day to $9,500 per day based on a
reassessment of the potential harm. No documentary
evidence to support this reassessment could be found in
the region's records.
As negotiations proceeded, the region set a target
penalty settlement of $200,000. The basis for the
settlement target was not clearly documented in the
region's records. The region settled on a final
assessed penalty of $90,000 to be paid in installments
over three years. Justification for settling on .
$90,000 over three years was not documented in the
region's case files.
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Clean Air Act Case {EPA Audit Report No. E1K67-05-0449-80743)
A company accrued economic benefits of $900,000 over a two
and one-half year period of violations, but the region
reduced the amount to $14,000 because the company exceeded
its emission standard for only 15 days during this time.
Even though there were only 15 days of violation, the
company saved $900,000 by delaying the installation of the
pollution control equipment.
The region stated that the company did not continuously
violate the CAA and the civil penalty policy assumes
continuous violation of the statute is necessary. We
believe it is of little consequence that the violations were
on occasions or on a continuous basis, the economic benefit
from delayed investment in pollution control equipment is
the same. EPA's policy is to recover the savings the
violator received from delayed and avoided costs. The CAA
authorizes EPA to assess penalties of up to $25,000 per day
per violation for noncompliance with program requirements;
in this case $375,000 (15 days times $25,000 per day).
There should have been a higher collection to offset the
economic benefits in this case.
Most Agency personnel agreed that there were lapses in
documenting the penalty calculations and subsequent penalty
adjustments. Some regions, to correct this situation, issued
instructions for the computation and documentation of all
penalties in the future.
We noted that in March 1986, the OECM Associate Enforcement
Counsel, Air Enforcement Division, informed all Regional Counsels
of the need to document settlements of penalty cases. The
memorandum instituted the requirements that: (1) all new air
enforcement litigation reports contain the calculations which
support the penalty recommended as the minimum settlement
penalty, and (2) regional case files contain documentation of the
rationale for changes in the penalty from the time a case is
referred until a consent decree is signed.
Further, the memorandum provided that:
After an enforcement action has been referred, regional case
attorneys should record in their case files any change in
the settlement penalty based on negotiations with the source
or new information related to the merits or the equities of
the case which came to light after the litigation report was
written. The record should reflect the date and
Headquarters person who approved the change, as required by
policies GM-26 and GM-39 in the General Enforcement Policy
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Compendium. This procedure carries forward, after the
referral date, EPA's ability to show that penalties are
determined in a logical and rational manner.
Other {jedia Programs
Although we did not perform detail work in other media
programs, our analysis of the files supporting OECM's
claimed $24 million assessed penalties in FY 1987
showed significant reductions to recommended penalties
in the Toxic Substance Control Act (TSCA) and the
Federal Insecticide, Fungicide, and Rodenticide Act
(FIFRA) programs. We computed, by program area for
TSCA and FIFRA, the following reductions from the
regions' recommended penalties.
Percent of
Program No. of Cases Recommended Assessed Recommended
Area Reviewed Penalties Penalties Penalties Reduced
All FY 1987 Closed Cases
TSCA 741 $27,571,485 $5,057,829 82
FIFRA 198 1,093,458 248,539 77
In reply to our draft report, the Acting Assistant
Administrator for OECM stated that within the relatively
short time to review this issue, OECM has evaluated these
statistics with the Office of Pesticides and Toxic
Substances' Office of Compliance Monitoring and has reached
the following conclusions.
TSCA
A large percentage (over 50%) of the 741 cases settled
during FY 1987 involved violations of the Asbestos In
Schools regulations, 40 CFR 763 et seq. Because the
regulated community consists entirely of public and private
educational institutions, the Agency penalty policy
recommended that the penalties be substantially mitigated or
even fully abated if the school undertook asbestos abatement
actions, which were not required under TSCA or the Part 763
rules.
Also, TSCA penalties must be reduced by statute, whenever
they may substantially affect a facility's "ability to
continue in business" or if there is a financial condition
which prevents its ability to pay the fine from cash
reserves. Before EPA will consider reducing a penalty based
upon ability to pay, EPA enforcement offices are instructed
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to obtain credible financial information, such as tax
returns, corporate balance sheets or other similar financial
documentation.
Finally, TSCA penalties have been reduced in settlement to
obtain leverage for environmentally beneficial expenditures
as a condition of settlement. Generally, "settlements with
conditions" involve the implementation of compliance or
abatement activities which are unrelated to correcting the
violation that is the subject of the enforcement action
(that is a cost that can not be used to reduce the penalty)
or implementation of a compliance audit. An example of a
penalty mitigation project might involve the accelerated
removal and disposal of PCS electrical equipment. A dollar
for dollar credit is not given. Some offices have given a
$1.00 reduction for each $3.00 spent up to a maximum penalty
reduction. With the increased emphasis in EPA on "pollution
prevention", it is anticipated that a greater number of
cases may be settled with conditions like these and care
must be taken to insure that adequate documentation is
maintained in the official file and that certification of
completion is submitted and verified to ensure that
settlement terms are met.
To insure that penalty reductions are appropriately
documented, the TSCA Civil Penalty Policy, published at 45
F.R. 24358 September 10, 1980, requires that the published
work sheet be completed to document each penalty reduction.
FIFRA
In the FIFRA program, a civil penalty matrix and categories
of violations were published in the Federal Register in
1974. This guidance provides that the civil penalty to be
imposed must take into account the size of the violator's
business. EPA must then impose a graduated penalty based
upon 5 category sizes of business, the largest category
being over $1,000,000 in gross sales. EPA regional offices
endeavor to place the violator into the appropriate category
through reliance on the most readily accessible data, which
are Dun and Bradstreet financial reports. Often, however,
at settlement conferences, FIFRA violators are able to
demonstrate through actual tax returns or accounting
statements that the Dun and Bradstreet reports, which are
advisory and not based on actual certified tax returns are
inflated. Under FIFRA, by statute, EPA is precluded from
asking for tax returns or financial or sales data at the
time of inspection.
FIFRA penalties may also be reduced for factors similar to
TSCA (settlements with conditions or abatement activity),
although to a much lesser degree. Finally, a significant
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factor in many FIFRA reduction concerns that type of
violation actually involved. The more hazardous misuse of
pesticides violation, by statute, are to be handled by the
state lead agencies. This leaves Federal enforcement
efforts to concentrate on violations of misbranding (i.e.,
false labels or false claims) or failure to submit annual
production reports under FIFRA. In a large proportion of
these cases, perhaps 35 percent are marginal businesses or
businesses which are about to, or have, ceased operations.
In these cases, very minor fines may be collected along with
terminations or surrender to the Registrant's FIFRA
establishment number.
State Penalty Practices
Some of our issued reports covered state activities related to
the computation, negotiation, mitigation, and assessment of
penalties. To a large degree, we found that states were not
properly administering either EPA's or their own penalty policies
for the cases we reviewed. It should be noted, however, that EPA
policy does not require states to follow EPA's penalty policy.
Clean Water Act
1. From our judgmental sample of 10 cases in which a
penalty should have been assessed, we found that a
state calculated and assessed penalties in only two
cases. We arbitrarily selected 10 other cases in which
penalties were assessed which gave us a total of 12
cases (10+2) in which penalties were calculated and
assessed. Penalties were not calculated in accordance
with the state guidelines in 9 of the 12 cases. In the
remaining three cases the economic benefit was
recovered only in one case.
From our judgmental sample of 10 cases, we found
another state had calculated and assessed penalties in
only 6 cases. There was no calculation of penalties in
the remaining four cases. The computed economic
benefit of $637,775 for the 6 cases was mitigated to
$88,000, a reduction of $549,775, or 86 percent.
The region having oversight responsibility over these
two states told us that it has instituted a tracking
and quarterly reporting system for state penalties.
This will enable the region to ensure that the states
are collecting sufficient penalties. Additional
documentation of how penalties are calculated will also
be requested from the states to show that assessed
penalties comply with national and state policies.
(EPA Audit Report No. E1H2D8-05-0293-9100164)
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2. The company experienced at least three illegal
discharges in violation of its NPDES permit conditions
in 1986 and 1987. No monetary penalties were proposed
for any of the violations although the permit provides
for civil penalties not to exceed $10,000 (prior to
February 1987) and $25,000 (after February 1987) for
each violation.
As a result of the first of the three discharges, the
state issued a Notice of violation (NOV) to the company
on December 2, 1986 for the discharge of 13,500 gallons
of process water. The second discharge, involving 4
million gallons of mill sludge occurred on February 27,
1987, and was due to the failure of the facility's main
holding pond embankment. The state issued another NOV
to the company on April 8, 1987. The state inspection
report relating to the discharge stated: "The
discharge was a major event which had a severe impact
on the area surrounding the discharge point."
The third discharge occurred on March 31, 1987 and
involved 400,000 gallons of process wastewater. As a
result of this discharge, the state issued a letter of
minor violation to the company on April 8, 1987. This
letter was issued on the same date that the NOV was
issued for the second discharge. We believe that
serious questions are raised about the state's
enforcement policies when it issues a NOV and a letter
of minor violation on the same date to the same
violator and neither action includes a monetary
penalty. It is also difficult to understand how the
state can rationalize that the two discharges were not
indicative of serious violations of permit conditions;
especially since the facility had three discharge
violations in a 4-month period. (EPA Audit Report No.
E1F58-09-0184-9100446)
Safe Drinking Water Act (EPA Audit Report No. E1HW7-03-0171-
81928)
• The four states covered by our review did not (1) issue
timely violation notices to the suppliers, (2) obtain
evidence of public notification, (3) perform any
significant enforcement actions against non-community
water systems (NCWS), (4) develop or implement
enforcement strategies against NCWS, and (5) comply
with Federal reporting requirements concerning
enforcement actions. Some states were not able to
provide statistics for the number of enforcement
actions regarding NCWS. We were informed by various
personnel that enforcement resources were limited at best
and were generally directed at community water systems.
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Clean Air Act - NESHAP (EPA Audit Report No. E1GM7-05-0571-
80821)
The delegated agencies in a state did not commit themselves to
EPA's civil penalty policy, differed among themselves as to the
severity of cash penalties, and resolved major violations without
assessing cash penalties. One agency based their initial penalty
calculation on the EPA civil penalty policy, but the amount was
automatically reduced 90 percent prior to making a settlement
proposal to the violator. In addition, if the violator was
cooperative and agreed to take corrective action, the penalty
assessment was frequently reduced or waived during the settlement
process.
Also, penalties were not always assessed. For example:
1. A prime contractor and subcontractor were cited for the
following violations during the renovation of a building.
Failure to provide notification of intent to remove
asbestos-containing material.
Failure to wet asbestos-containing material prior to
removal.
Failure to store asbestos-containing material in
sealed, labeled, leak-tight containers (the
material was dumped into an open-bodied truck).
Even though the violators did not follow asbestos NESHAP
regulations and gained significant economic benefits and
posed potentially serious health hazards to the public, a
penalty was not computed nor assessed for these major
violations.
2. An asbestos abatement company was cited for the following
violations during the renovation of an elementary school.
Failure to wet asbestos-containing material prior to
removal.
Storage of dry asbestos material in unsealed bags.
Even though the violator did not follow asbestos NESHAP
regulations and gained significant economic benefits I
and posed potentially serious health hazards to the |
public, a penalty was not computed nor assessed for
these major violations.
State agencies were not aggressively enforcing the asbestos
NESHAP regulations with penalties. Low or no penalties could
lead to repeat violations.
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Clean Air Act—Stationary Sources (EPA Audit Report No. E1F58-
09-0184-9100446)
The company was consistently in violation of the
visible emissions air standard for opacity since at
least 1980. Although the company was fined $500 in
1980 for its air standards violations, it was not
placed on a compliance schedule at the time. As a
result, violations continued. A state inspection
report issued in October 1985 noted that the company
was in continuous violation of the opacity limit.
However, no penalty was assessed as a result of the
inspection.
In April 1986, a compliance schedule was agreed to by
the state and the company. The schedule required the
company to construct a scrubber to control visible
emissions from the bypass burner boiler by July 1988.
In June 1987, the state revised the compliance schedule
and extended the scrubber installation date to July
1989. In May 1988, the state again revised the
schedule and this time extended the scrubber
installation date to July 1990. Thus, during the 10-
year period 1980 and 1990, the company will have
continuously violated air standards and paid a total
penalty of only $500. It is apparent such a nominal
penalty does not meet EPA's enforcement policies. More
importantly, the state enforcement policies have almost
no impact on eliminating this source of air pollution.
Need for Continuing Education Regarding Negotiation Skills
OECM has offered "Negotiation Skills Training" courses to
regional attorneys. This 2-day course was provided six items
during FY 1988 and seven times in FY 1989, but not to all
attorneys. The course covers a variety of areas including:
• Basic concepts as applied to environmental
enforcement negotiations.
Planning for negotiations.
Pressure points.
Defensive tactics.
We reviewed the training courses taken by attorneys in Regions 5,
6, 7 and 9 who were involved in negotiations of penalties. Of
the 12 attorneys we interviewed, 5 did not have the "Negotiation
Skills Training".
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In December 1988, a National FY 1988 Regional Counsel Audit
Report was issued by OECM and General Counsel. The report is a
compilation of individual audits and a separate report was issued
to each Regional Counsel. The report's primary finding regarding
resource issues was the high turnover of professional and support
staff. The turnover rate was very serious in some regions. For
example, over the past 2 years Region 1 has experienced close to
a 50 percent turnover and Region 3 a 40 percent turnover.
Negotiation of penalties is a very important aspect of an
attorney's duties. It is an area covered in each attorney's
performance standards. Because of the high turnover of attorneys
in some regions, OECM should strongly consider providing the
training to all appropriate Regional Counsel staff. The training
should be a requirement for attorneys assigned penalty
negotiation cases. Such training is essential if the regions are
going to enforce environmental laws vigorously, consistently and
equitably.
Penalties play an important role in an effective enforcement
program. Deterrence is achieved to a major degree by the
likelihood and severity of a penalty. The regulated community
has had ample time to become aware of EPA's rules and to
implement internal controls to ensure compliance. Now is the
time for the Agency to strengthen its enforcement actions against
those violators and impose penalties large enough to punish them
and bring about compliance.
In addition, it is essential that the best results are obtained
by EPA from each violator of Federal statutes. Otherwise the
violator will use settlements on prior cases as a negotiation
factor during litigation. For example, during the litigation of
one case, we found references to a previously settled case
concerning another violator. The defendant stated that it
attempted to analyze and compare its situation with that of
another company with a similar situation. Their analysis
disclosed that the volume of effluent from the other company's
three very large plants was about twice the volume of its
relatively small eight plants and the approximate severity of the
violation of metals standards in the other company's effluent was
about four times its own. Yet, the penalty proposed to them is
about two and two-thirds times the penalty assessed the other
company. Along these lines, we were informed by a regional staff
attorney that legal counsel for violators contact one another to
exchange insights and legal strategies for their clients defense
against EPA civil actions.
In reviewing the effectiveness of a program in accomplishing its
goals and objectives, it is important to evaluate it in light of
the program's internal controls. Internal control standards
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define the minimum level of quality acceptable for internal
control systems, and constitute the basis against which systems
are to be evaluated. The GAO general and specific standards that
apply to EPA programs include the following:
Internal control systems, all transactions and events are
to be clearly documented, and the documentation available
and easily accessible for examination.
Transactions and other significant events are to be
promptly recorded and classified.
Transactions and other significant events are to be
authorized and executed only by persons acting within the
scope of their authority.
Competent personnel, adequately trained and assessed on
their implementation of necessary internal controls.
Regarding the first three standards, our reviews showed a need
for Agency personnel to fully document the transactions and
events pertaining to the computation, negotiation, mitigation,
and assessment of penalties. There is also a need for
"Negotiation Skill Training" for all attorneys engaged in
enforcement negotiations.
Draft Report Recommendations
We recommended that the OECM Acting Assistant Administrator in
coordination with the Office of General Counsel and the Assistant
Administrators for the program Offices of (1) Air and Radiation,
(2) Solid Waste and Emergency Response, (3) Water, and (4)
Pesticides and Toxic Substances:
1. Re-emphasize to Agency personnel the need to fully
adhere to media program penalty policies.
2. Institute a more aggressive oversight program of
regional activities. Such a program would include
expanded reviews of regional penalty programs to
include adequacy of penalty computations, Agency
reductions to the computed amounts, negotiations of
further reductions by Department of Justice and Agency
attorneys during negotiations with violators, and the
adequacy of documentation to support the decisions.
The regional oversight of state activities should be part of
the Headquarters expanded reviews. These reviews would also
ensure that the various regional offices have established
procedures in place that implement the media programs' civil
penalty policy.
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3. Institute a regional reporting and oversight program of
state penalty assessment activities to ensure that proper
penalties are levied.
4. Coordinate with the Office of General Counsel and provide
"Negotiation Skills Training" to appropriate Regional
Counsel staff on a regular and timely basis. Consideration
should be given to making this training mandatory for all
attorneys engaged in enforcement negotiations.
Aaencv Reply To PIG Draft Report
The Acting Assistant Administrator for OECM agreed with our
recommendations. Regarding more aggressive oversight of regional
activities, he believes this can best be accomplished through
expanding the existing media program oversight audits conducted
periodically by each program office with his office's
participation.
With respect to "Negotiation Skills Training", OECM will review
the implications of making this training, or its equivalent,
mandatory for those attorneys engaged in enforcement
negotiations.
Recommendation
We recommend that the Acting Assistant Administrator for OECM
ensure that the planned actions are completed.
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FINDING NO. 2- PENALTY INFORMATION NEEDS TO BE PART OF EPA'S
STRATEGIC PLANNING AND MANAGEMENT^ SYSTEM REPORT
EPA information on civil, judicial, and administrative penalties
was not part of the Strategic Planning and Management System
Report (SPMS). Nor was penalty information aggregated by the
Agency in such a fashion to make it useful in reviewing all of
the various issues and concerns associated with the negotiation
and assessment of penalties against violators. For example, EPA
statistics did not capture the penalties computed and the
millions of dollars mitigated by EPA and DOJ negotiatolrs. As a
result, senior management cannot adequately judge the success of
the program nor fully identify those areas needing improvement in
the computation, negotiation, mitigation, and assessment of
penalties.
A measure of the effectiveness of EPA's enforcement program is
the percentage of the regulated community in compliance with
EPA's regulations. Likewise, a measure of EPA's enforcement
effectiveness is the action taken and penalties assessed against
those relatively few concerns which do not comply with EPA
regulations. It is EPA policy to hit these non-compliers hard
with high dollar penalties. The success in bringing them into
compliance is an additional benefit of EPA's enforcement policy.
EPA's SPMS report does not capture the effectiveness of its
enforcement program. Generally, SPMS only shows the status of
total cases; nothing is shown regarding penalties.
The Quick Look Report ~ Consolidated Docket Enforcement System -
- which OECM and the media program staff rely upon to monitor the
status of civil cases could be used to accumulate the appropriate
penalty information for the SPMS report. Data for each case
include the dollar amount for the computed economic benefit, the
gravity component, proposed penalty, and assessed penalty.
However, it is not uncommon for the economic benefit and gravity
component amounts to be missing. This area is discussed below.
OECM's Quick Look Report Not Complete
Both the EPA Uniform Civil Penalty Policy of February 1984, and
the various program specific penalty policies (CAA, CWA and
RCRA), mandate the inclusion of the economic benefits of
noncompliance gained by a violator in the calculation of the
proposed and assessed penalties. The various policies require
that an "economic benefit component" be calculated and added to
the gravity-based penalty component when a violation results in
(significant) economic benefit to the violator. RCRA policy
defines a significant economic benefit, in monetary terms, as one
that exceeds $2,500; while the CAA policy defines it as one that
exceeds $5,000.
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We obtained a report, as of October 1988, that the Agency uses in
managing its penalty universe (Quick Look Report—Consolidated
Enforcement System). We found that the management information
was significantly lacking in data on the computation of economic
gains and gravity amounts (See Exhibits 3, 4, and 5 for examples
of CWA, RCRA, and CAA print outs, respectively).
Our analysis of the report information showed the following:
No. Of No. Of Cases
Program Cases Penalty Not Shown Percent
Benefit Gravity Benefit Gravity
CWA 274 220 226 80 82
RCRA 89 87 83 98 93
CAA 282 189 183 67 65
Our analysis shows that for the 274 CWA cases, the regions were
not providing benefit and gravity information for the Quick Look
Report in 80 and 82 percent of the cases, respectively.
Regarding the 89 RCRA cases, our analysis shows that the regions
did not provide benefit component information in 87 cases (98
percent) and gravity component information in 83 cases (93
percent). For the 282 CAA cases, our analysis shows that the
regions were not providing benefit and gravity information in 67
and 65 percent of the cases, respectively. The failure to
iriclude the information in the Quick Look Report indicates that
the amounts may not have been computed.
We also analyzed the information contained in the Quick Look
Report by region to determine whether economic benefit and
gravity amounts are computed and included in the case information
data in all cases by region. The following is the result of our
analysis.
gercent Data Were__Not Included
CWA RCRA CAA
Region Benefit Gravity Benefit G_r_ayity Benefit Gravity
1 78 78 100 100 83 83
2 53 47 100 100 28 25
3 90 93 100 100 83 70
4 62 75 86 100 56 37
5 91 91 97 87 87 90
6 82 82 100 92 50 50
7 80 80 100 100 56 56
8 85 92 100 100 78 78
9 100 100 100 100 73 73
10 81 81 100 100 50 50
As shown above the problem of not including the economic benefit
and gravity amounts in the Quick Look Report is national.
30
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The Quick Look Report is incomplete. Relevant data for tracking
each case is, in many instances, missing. This information must
be computed, in a timely manner, for each case and included in
the data base for management's use and review. It would also
serve as a checkpoint to ensure that relevant penalty data is
computed.
Enforcement Accomplishments
The Agency annually reports on its enforcement accomplishments.
However, the statistics do not capture the effectiveness of EPA's
enforcement program as discussed below.
OECM's "FY 1988 Environmental Accomplishments Report" stated that
Federal environmental enforcement activity is proceeding at
levels unmatched since the Environmental Protection Agency was
created in 1970 to enhance the protection of human health and the
environment from the risks resulting from environmental
pollution. The report further stated that in FY 1988, EPA
established new high-watermarks for both Federal civil and
criminal judicial enforcement actions with 372 civil cases and 59
criminal cases referred to DOJ. since FY 1984, EPA has collected
$71.2 million in civil judicial penalties and 39.1 million in
administrative penalties. The report further stated that as part
of the effort to deter noncompliance, EPA's enforcement programs
have developed penalty policies designed to assess penalties
which recoup the economic benefit that a noncomplying facility
has realized, and assess additional penalties commensurate with
the gravity of the violation(s).
The above types of statistics only show the number of referred
cases and penalty dollars collected, which demonstrates only a
minor measure of program effectiveness. We believe the
effectiveness of the Agency's use of penalties depends on the
premises associated with the use of this enforcement tool. In
order to be an effective deterrent, civil penalties should be
large enough to hurt the offender financially. Premises
pertinent to enforcement are as follows:
Penalties are punitive in nature and intent.
In order to be punitive, penalties must be large enough
to punish the wrongdoer and to deter him and others from
committing the offense.
Penalties that do not negate the economic benefits
derived from violations of program requirements are not
fair to those who comply with the program and do not
deter future violations.
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The assessment of penalties that are sufficiently burdensome to
be a deterrent to future violations is a critical tool in
reaching EPA's goals. It must be made clear to the regulated
community that the cost of noncompliance will be greater than
that of compliance. Penalties should be punitive in nature
rather than remedial. Penalties should deter future
noncompliance, by both violators and potential violators, and not
just bring a violator back into compliance.
A strong and well managed national program on assessment of
penalties against violators of EPA regulations needs reliable
summary information to judge the success or failure of the
program and to identify those critical areas needing immediate
management attention. SPMS, a management tool, whose principal
clients are the Administrator and Deputy Administrator, is
designed to provide a framework for the setting of goals and
priorities, the development of annual guidance for program
implementation, and for the evaluation of performance in meeting
program objectives. Senior managers review SPMS reports to help
them determine accomplishments, problem areas and possible
corrective actions. Thus, EPA's management controls need to
track the statutory penalty, the economic benefit and gravity-
based components, the proposed penalty, the assessed penalty, and
any reductions to each.
Draft Report Recommendation
We recommended that the OECM Acting Assistant Administrator,
coordinate with the Assistant Administrator for the Office of
Policy, Planning, and Evaluation (OPPE), and implement a
Strategic Planning and Management System (SPMS) reporting
requirement to provide for the penalty results of concluded cases
by media program. SPMS should show computed penalties,
reductions by Agency staff, reductions by Department of Justice
and Agency staff, and the final assessed amounts. We recommended
also that the Acting Assistant Administrator ensure that the
Quick Look Report is complete.
Agency Reply To PIG Draft Report
The Acting Assistant Administrator for OECM disagreed with our
recommendation primarily because it would require a significant
workload increase. The Assistant Administrator for OPPE agreed
partially with our recommendation and stated that they have
already initiated discussions with OECM concerning this
recommendation. However, OPPE would rather see the management of
the OECM functions strengthened and use the specific reporting
recommendation as part of OECM's own management of Agency penalty
program(s) rather than incorporating such specific details in
SPMS.
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Auditor1sComments
The information we are asking for is already supposed to be
produced via the penalty negotiation process; thus, we do not see
a major increase in workload. This data should be accumulated
in a fashion so that the effectiveness of the media penalty
negotiation process can be better evaluated by senior EPA
management. A good start would be to ensure that OECM's Quick
Look Report, which already contains various penalty information,
is complete. The Quick Look Report could be expanded to increase
the other information contained in our draft report
recommendation. The expanded and complete Quick Look Report
would then contain the accumulated media penalty data, which
could very easily be incorporated into SPMS.
Recomroendat ion
We recommend that the OECM Acting Assistant Administrator
coordinate with the OPPE Assistant Administrator to assure that
Federal penalty results of concluded cases by media programs are
accumulated. The data should show computed penalties, reductions
by Agency staff, reductions by DOJ and Agency staff, and the
final assessed amounts. A decision by appropriate officials can
be made at a later date as to whether the data should be made
part of SPMS.
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EXHIBIT 1
Page 1 of 9
(see page 1)
SUMMARY OF ISSUED REPORTS
1. "Office of Mobile Sources' Establishment, Mitigation, and
Collection of Penalties" (E1G16-05-0058-61560)
The penalties proposed by the Office of Mobile Sources'
(OMS) on violators of EPA's unleaded gasoline
regulations have not changed since 1975 and may need
revision. Proposed penalties are in some cases only 5
to 10 percent of the amount allowed by the Clean Air
Act. The effectiveness of EPA's unleaded gasoline
regulations and future enforcement efforts against fuel
additive violations could be improved by a formal
periodic review of the proposed penalty tables to
ensure penalties are large enough to encourage
compliance. The effects of noncompliance with EPA's
unleaded gasoline regulations are significant.
OMS has not finalized its draft February 1985 Civil
Penalty Policy for fuel and tampering violations. Each
EPA program office, in a joint effort with the Office
of Enforcement and Compliance Monitoring (OECM), is to
revise existing polices or write new policies to ensure
confonnance with the Agency's February 1984 Policy on
Civil Penalties. However, OMS has not submitted its
policy to OECM for review.
If a penalty is to achieve deterrence, both the
violator and the general public must be convinced that
the penalty places the violator in a worse position
than those who have complied in a timely fashion. The
penalties used by OMS are over 10 years old. Thus the
regulated community has had ample time to comply with
EPA's rules. OMS needs to coordinate its draft penalty
policy with OECM to assure its enforcement program is
consistent with the Agency's Policy on Civil Penalties.
2. "Region 5's Stationary Sources of Air Pollution Compliance
and Enforcement Program" (E1K67-05-0449-80743)
The Region and two States were not timely enforcing
stationary sources for air pollution violations. The
violations occurred in cities which are not meeting
National Ambient Air Quality Standards. Consequently,
the environment was harmed because significant
violations were allowed to continue beyond timeframes
34
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EXHIBIT 1
Page 2 of 9
established by EPA. Also, EPA's goal of fair and of
equitable treatment of violators was not being achieved.
Many of the violators exceeded EPA's target resolution date
by over 1 year. Assessment of about $3.3 million in cash
penalties for the cases reviewed was delayed.
Regional officials were not calculating and assessing
penalties for stationary source violations of the Clean
Air Act. Most collected penalties did not recover the
savings the violator received from delayed and/or
avoided costs (economic benefit). Further, we found
cases with no support as to how the penalty was
calculated. We also found cases with substantial
unsupported reductions to calculated penalties.
Consequently, EPA's goals of deterrence and fair and
equitable treatment of violators are not being
achieved.
We judgmentally selected 12 of the 18 significant cases
that were settled with penalties during fiscal year
1986. We compared the calculated penalty contained in
the litigation report to the Agency's civil penalty
guidance. Only four litigation reports contained
penalty calculations that followed the civil penalty
policy. Three of the remaining eight cases had no
documentation as to how the penalty was calculated. In
one case the penalty calculation did not include an
amount for a serious violation component even though
the company was in violation for 10 years. The
collected penalty, in only two of nine applicable
cases, was greater than the economic benefit the
company received from not complying with the Clean Air
Act. Further, cases were found where the calculated
penalty amount was significantly reduced without any
documentation.
3. "Consolidated Report on EPA's Administration of the Asbestos
National Emission Standard for Hazardous Air Pollutants
(NESHAP)" (E1GM7-05-0571-80821)
The Agency needs to enforce NESHAP regulations with
greater penalties. The assessment of penalties for
violations of NESHAP regulations in the regions was
generally inadequate because of a lax attitude toward
penalizing violators. Also, State enforcement programs
varied in thoroughness, and States were not fully
carrying out their delegated responsibilities.
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EXHIBIT 1
Page 3 of 9
Consequently, the primary purpose of penalties, namely to
deter violations of EPA's regulations and to remove any
economic benefit resulting from noncompliance, was less
likely to be accomplished.
4. "Non-Community Water system Program" (E1HW7-03-0171-81928)
EPA was not enforcing water quality standards aboard
interstate carrier conveyances (ICC) (airplanes, trains and
buses) serving drinking water to the public. Consequently,
passengers traveling on these ICCs were being exposed to
unnecessary health risks. Over 650,000 passengers are
served on board aircraft daily, many of whom consume
drinking water in the form of hot and cold drinks.
According to the Safe Drinking Water Act, suppliers of this
drinking water must comply with testing and reporting
requirements. These requirements are necessary even if the
water was obtained from a public water system that has
complied with all Federal regulations. The additional
testing by the ICCs is essential because the water could
become contaminated in transporting or storing the water
aboard the facilities.
The four states covered by our review did not (a) issue
timely violation notices to the suppliers, (b) obtain
evidence of public notification, (c) perform any
significant enforcement actions against non-community
water systems (NCWS), (d) develop or implement
enforcement strategies against NCWS and (e) comply with
Federal reporting requirements concerning enforcement
actions. Some states were not able to provide
statistics for the number of enforcement actions
regarding NCWS. We were informed by various personnel
that enforcement resources were limited at best and
were generally directed at community water systems.
5. "Review of Region 5's National Pollutant Discharge
Elimination System Permit Enforcement Program" (E1H2D8-05-
0293-9100164)
The Region did not follow the Agency's civil penalty
policy in assessing penalties for violations of NPDES
permit requirements issued under the Clean Water Act in
three of the six cases reviewed. Penalties were
substantially reduced with very little documentation to
support the reductions. The assessed penalties did not
always recover the economic benefit of noncompliance
the violators received. A double standard has been
36
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EXHIBIT 1
Page 4 of 9
established for industrial and municipal violators, and the
standards themselves are not being implemented on a
consistent basis. As a result, EPA's goals of deterrence
and fair and equitable treatment of violators are not being
met.
Six of 11 NPDES cases settled with penalties during FY 1987
were reviewed to determine whether penalties were calculated
and assessed in accordance with Agency guidance. Five of
the six cases reviewed included documentation to show
economic benefit of delayed compliance and to support the
recommended penalty. However, the penalties assessed
($202,500) in three of the five cases were about $10.9
million less than the economic benefit ($11,134,000) the
violators received by no complying with the Clean Water Act.
In addition, the files contained little documentation to
justify the substantial reductions.
6. "Report of Region 4's National Pollutant Discharge
Elimination System Permit Enforcement Program"
(E1HWD8-04-0207-9100462)
Region 4 and the states of Georgia and Alabama were not
always effectively enforcing National Pollutant
Discharge Elimination System (NPDES) permits. Neither
the region nor the two states had adequate enforcement
management systems. Regional and state personnel were
reluctant to take the necessary enforcement measures
needed to prevent and eliminate permit violations.
Enforcement actions were not always timely, and actions
were not escalated when situations warranted.
Financial penalties were not effectively used. As a
result, some of the region's most significant and
chronic NPDES permit violators avoided the expense of
complying with the Clean Water Act with little or no
penalty.
Because the region and the states did not effectively
enforce NPDES requirements, the statutory goals of
Congress and EPA were not fully met in Region 4.
Agency Operating Guidance for fiscal year 1988
specifically stated that "a high priority for surface
water programs in 1988 is to protect human health and
the environment by controlling toxicity in all waters
where designated uses are not being attained due to the
presence of toxic discharges from either point or nonpoint
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EXHIBIT 1
Page 5 of 9
sources11. Less than aggressive enforcement of the NPDES
requirements negatively impacts the Nation's waterways,
causing a danger to their aquatic life and limiting their
recreational use.
7. "Report on National Pollutant Discharge Elimination System
Permit Enforcement Program in Region 2" (E1HW8-02-0133-
9100476)
The two states reviewed for this report did not follow
the Agency's and/or their own civil administrative
policies in assessing penalties for violations of NPDES
permits. The review disclosed (a) penalty assessments
did not include an economic benefit component for
violator noncompliance, recover the States'
administrative cost of enforcement, or consider other
relevant factors; (b) penalties for previous violations were
suspended if violators complied with current Consent Order
provisions; (c) penalty assessments were inconsistent for
municipal and industrial violators and for similar
violations; (d) stipulated penalties were not always
included in Orders; and (e) cases files lacked adequate
documentation to support original or compromised penalty
amounts. These conditions occur because of inadequate or
failure to implement existing policies and procedures
pertaining to penalty assessments, computations and
documentation. As a result, EPA's and the State's goal of
fair and equitable treatment of violators was not always
being met. In addition, the imposition of penalties did not
serve as an effective means for deterring continued violator
noncompliance.
8. "Report of Region 9's Administration of the State of
Hawaii's Grant Programs for Fiscal Years 1986 through 1988"
(E1F58-09-0184-9100446)
Facilities in the State of Hawaii have been able to
discharge pollutants into the water and air in
violation of requirements without concern that
significant enforcement actions would be taken against
them. This condition was due to a lack of a serious
commitment by the Department of Health (DOH) to
establish an effective enforcement program. This
weakness was compounded by the fact that the Region had
not assumed its responsibility to direct DOH to
implement an effective enforcement program, or
otherwise taken primary responsibility for enforcement
of water and air requirements in the state.
Although we noted a number of examples of facilities in
the state with long histories of water and air
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EXHIBIT 1
Page 6 of 9
discharge violations, DOH had not proposed or collected
meaningful monetary penalties against them. For example,
one air discharger had violated requirements for at least
eight years with only a $500 penalty being proposed during
the entire period. Also, for FY 1987, the Region indicated
that of the $276,000 of water pollution penalties proposed
by the state, only $2,000 had been collected. In view of
the significance of the violations observed and their
duration, it is our opinion that the low penalty rates did
not meet the goals of EPA's General Enforcement Policy. The
goals of the policy require an enforcement approach that
provides a deterrent effect and swift resolution of
environmental problems.
Monetary penalties for violations of NPDES permit
requirements were generally not proposed by DOH, and
violator compliance schedules were often not enforced.
As a result, only a fraction of the violations which
occurred over the last several years have resulted in a
penalty, and many did not result in timely correction
of the pollution problem. With respect to penalties,
one-third of the 27 Notice of Violations (NOVs) issued
by the DOH under the water pollution control program in
FY's 1986 and 1987 did not include a proposed penalty.
Further, there was no documentation explaining why
penalties were not proposed against the violators that
received NOVs. However, our review disclosed that many
of the NPDES violations reported in the NOVs were
repeat violations that had continued over long periods
of time.
We concluded that DOH has not enforced air pollution
control standards in the State of Hawaii in an
effective manner. DOH has generally extended violator
compliance schedule due dates, rather than initiate
enforcement actions when compliance schedules are not
met. Also, when monetary penalties are proposed, they
are generally not sufficient to accomplish the goals of
EPA's enforcement policies.
9. "Consolidated Report on Review of EPA's Controls Over
Administrative Penalties Under the RCRA Enforcement Program"
(E1G68-09-0188-9100479)
Regional offices are not, as a general rule, including
the value of the economic benefits of noncompliance in
proposed and assessed administrative penalties against
RCRA violators. As a result, violators gain
financially from noncompliance with RCRA statutory and
regulatory requirements. Of the 20 cases reviewed
where it appeared that a value for the economic
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EXHIBIT 1
Page 7 of 9
benefits of noncompliance should have been assessed, only
one case had a final assessed penalty that was sufficient to
eliminate the violators economic benefits. To illustrate
the potential benefits that can be derived, the violator in
one of the cases reviewed had estimated economic benefits of
$229,000 because it did not comply with RCRA requirements.
The affected region, however, settled that case with a final
assessed penalty of only $45,000, resulting in a net gain to
the violator of $184,000.
Sufficient gravity-based RCRA penalties are not being
consistently proposed to reflect the seriousness,
duration of noncompliance, nor all of the violations
disclosed. This condition results in penalties
inadequate to provide an effective deterrent to
noncompliance by the RCRA regulated community. To
illustrate, cases were reviewed where groundwater
monitoring violations, improper discharges of hazardous
waste, and other significant RCRA violations occurred
for periods of up to three years, resulting in proposed
gravity-based penalties as small as $6,500. In one
case, the proposed gravity-based penalty amounted to
$29 per day for 34 months of noncompliance and in
another case only $11 per day for a six month period of
noncompliance. These conditions were largely
attributable to the regions either not considering
lengthy periods of noncompliance in computing gravity-
based penalties or not proposing penalties for all
distinguishable violations, as required by the RCRA
penalty policy.
Regional negotiators are mitigating RCRA penalties in
excess of the parameters contained in existing Agency
policy. Final negotiated RCRA administrative
penalties, for cases settled during the period reviewed
ranged from an average of 14 to 67 percent .of proposed
penalties with a national average of only 37 percent.
Cases reviewed included penalty reductions of as much
as $2 million and reductions for individual violations
ranged up to 100 percent. Excessive reductions of
penalties diminish the deterrent effects of the
enforcement program on the regulated community.
Reduced fines can also undermine EPA's efforts to
return significant noncompliers to compliance. In
effect, achievement of the Agency's penalty policy
goals, deterrence and fair and equitable treatment of
the regulated community, is questionable.
Regional offices are not documenting the proposed
penalty calculations or the specific negotiated
adjustments to proposed penalties, or including a
statement in the executed consent agreements of the
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EXHIBIT 1
Page 8 of 9
reasons for mitigating the penalties. Of the 20 cases
reviewed, 19 cases had at least one of these two conditions.
In some instances, significant reductions in penalties were
made without documentation explaining or justifying the
reduction. To illustrate, one case had a proposed penalty
that was $6.3 million less than the recommended maximum
penalty calculated by the region's enforcement personnel.
However, there were no regional records explaining or
justifying the difference. We attribute the lack of
documentation as required by the RCRA penalty policy, in
part, to regional concerns that the availability of detailed
information on penalty adjustments could jeopardize future
negotiations. The RCRA penalty policy requires such
documentation as one of the controls to assist in precluding
excessive or improper penalty mitigations without regional
management's full understanding. Such documentation also
increases the assurance that the regulated community is
being fairly and equitably treated.
10. GAO Report—Hazardous Waste...Many Enforcement Actions Do
Not Meet EPA Standards (GAO/RCED-88-140)
Penalties assessed by EPA and the states against
violators of RCRA requirements may not be large enough
to offset the economic benefits of noncompliance.
According to the Enforcement Response Policy, the EPA
regions are required to follow guidelines contained in
RCRA Civil Penalty Policy (RCPP) when assessing
penalties against violators of RCRA regulatory
requirements. The RCPP was issued in May 1984 to
ensure that RCRA penalties are equitably applied and
provide an adequate deterrent to noncompliance. The
policy provides that, with four exceptions, a penalty
should be large enough to remove the economic benefits
waste handlers might gain by not complying with RCRA
requirements. The Enforcement Response Policy, however,
does not require the states to use the RCPP when calculating
penalties. State penalty policies were not uniform in how
they consider the economic benefit of noncompliance in
penalty calculations and that existing EPA and state
policies and procedures for calculating penalties were not
being properly documented.
Consequently, there was no assurance that EPA and state
penalty policies are being properly implemented and that the
economic benefit of noncompliance is being adequately
calculated and included in the final penalty assessment. As
a result, final penalty assessments may not be large enough
to offset the economic benefit of noncompliance and thus
deter future noncompliance in the regulated community.
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EXHIBIT 1
Page 9 of 9
In general, GAO could not determine whether the EPA
regions issued penalties as prescribed by the RCPP
because of the lack of documentation in the files. The
regions reviewed issued proposed penalties in 40 of the
high-priority enforcement cases included in the review.
GAO reviewed 31 of these penalties and found only 2
cases in which they could verify that the economic
benefit was calculated in accordance with RCPP.
In nine cases GAO found that conditions related to one
of the four exceptions applied, and thus there was no
need to include the economic benefit in the proposed
penalty. However, GAO found no documentation
supporting these determinations. In 15 cases GAO
reviewed the penalty calculations, but did not find
sufficient evidence or documentation to show that the
economic benefit of noncompliance had been considered
in the penalty calculation. For the remaining five
cases, GAO found no documentation on penalty
calculations to review. Thus, in these 29 cases GAO
was unable to determine whether the proposed penalties
adequately considered the economic benefit of
noncompliance.
11. GAO Report—Inland Oil Spills...Stronger Regulation and
Enforcement Needed to Avoid Future Incidents
(GAO/RCED-89-65)
In the absence of national guidance on the imposition of
fines for violations of EPA's Oil Pollution Prevention
regulations, the regional offices have adopted inconsistent
policies. Overall, fines are rarely used, although EPA's
data indicate that the rate of noncompliance with the
regulations may be high.
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EXHIBIT 2
Page 1 of 6
(see page 18)
CASE SUMMARY EXAMPLES
Clean Water Act Cases
1. A company was discharging untreated process wastewater
directly into a nearby river and to a publicly-owned
treatment works through the sanitary sewer system. The
company did not have a NPDES permit to discharge into the
river. State authorities estimated that the company was
continuously discharging into the river since 1976. The
company was also not authorized to discharge into the
sanitary sewer. The company completed construction of a
connection to the sanitary sewer in March 1980. The company
had stated that it was discharging only sanitary waste,
instead of untreated process water.
In June 1983, the region requested that the state initiate
enforcement action. When the state did not take action, the
region referred the case for civil action on August 5, 1983.
The region initially calculated an economic benefit of
$839,852 and a gravity-based penalty component for
recalcitrance of $900,000. However, these amounts were
reduced to a recommended penalty of $100,000 due to the
company's inability to pay. A consent decree was signed on
November 23, 1986, and included a $100,000 penalty. The
company complied with the provisions of the consent decree,
but the assessed penalty of $100,000 had not been paid at
the time of our audit. (EPA Audit Report No. E1H2D8-05-
0293-9100164)
2. A company operates a manufacturing plant which
discharged, on a daily basis, between 50,000 and
200,000 gallons of waste water into the river. Between
January 1983 and January 1985, the company violated its
NPDES permit limits for various common effluents and
also dangerous substances, such as cyanide and copper.
The company had a history of noncompliance. The state
environmental authority issued a compliance order in 1979 to
the company for similar violations. The order included a
$2,500 penalty. The state also issued a new permit to the
company with less stringent effluent limits. The company
continued to violate its new permit and compliance order.
The state requested that the region take enforcement action
since further administrative action would not be sufficient
to obtain compliance.
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EXHIBIT 2
Page 2 of 6
The region referred the case for civil action, seeking a
civil penalty of $150,000, on June 27, 1985. The proposed
penalty did not even cover the calculated economic
benefit of $183,000. The Consent Agreement/Final Order
(CA/FO) included a penalty of $137,500. The company
has, to date, substantially complied with the CA/FO.
(EPA Audit Report No. E1H2D8-05-0293-9100164)
3. The region proposed a $7,332,000 penalty for the
city. The amount included $1,222,000 for the
recalcitrance factor because of the permittee's failure
to develop a definite compliance plan "after much
prompting from EPA". The city had continually violated
its permit conditions. The region initiated a civil
referral in September 1987 when it was evident the
facility was not going to meet the July 1, 1988
compliance deadline. In addition to the $1.2 million
for recalcitrance, the civil referral showed an
economic benefit of $5,845,000 because of the 84-month
delay in compliance and a gravity component of
$265,000. The region computed a settlement penalty of
$733,200. The region adjusted the original $7 million
downward by 10 percent for the city's inability to pay
and 80 percent for litigation considerations (an
assumption the government would save time and expense
by quickly settling). (EPA Audit Report No. E1HWD8-04-
0207-9100462)
ResourceConservation and Recovery Act Cases
1. The regional negotiators mitigated the proposed penalty
of $77,630 down to $7,500, or a reduction of over 90
percent. The region's complaint against the company
included the following counts and proposed penalties:
a. Failure to characterize on-site waste, $9,000;
b. Accumulating waste on-site for longer than 90 days;
c. Failure to demonstrate adequate liability insurance
coverage, $22,500; and
d. Failure to make timely payments to the financial
assurance trust fund, $37,130.
Documentation in the region's enforcement files indicated
that the company had been violating the RCRA regulations
cited in the complaint for a period of three to five years.
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EXHIBIT 2
Page 3 of 6
The company's response to the complaint attempted to justify
reasons why the facility should not comply instead of taking
positive actions to bring the facility into compliance. In
our opinion, the company clearly exhibited a reluctance to
comply as well as a substantial history of noncompliance.
Regional negotiators, in settling the case, adjusted the
proposed penalties down to $7,500. Counts (1), (2), (4),
with proposed penalties totaling $55,130, were reduced to
$0. Count (3), with a proposed penalty of $22,500, was
reduced 67 percent to $7,500. In our discussions with
regional negotiators, they provided the following reasons
for the penalty reductions:
a. Past cooperation and future corrective actions to be
done by the company;
b. The company assertions that it had characterized the
waste and had a manifest for transporting the waste;
c. Questionable applicability of regulations because the
company asserted it was a recycling and reprocessing
facility;
d. Conflicting information told by regional inspectors on
whether the company was regulated or not;
e. Avoidance of a complicated trial; and
f. The company just didn't want to pay the penalties.
Documentation in the region's case files did not provide
support for several of the above reasons. We found no
evidence that the company had made efforts to correct
violations independently of the region's enforcement/
inspections. The violator seemed to have ignored the
region's prior attempts at encouraging RCRA compliance. We
found no evidence to substantiate the performance of waste
characterization, that the wastes were not hazardous, or
that the shipments had been manifested. The problem with
conflicting information being given to the facility by
permitting personnel versus enforcement personnel, in our
opinion, is not a valid basis for excessively reducing
penalties. The region's 90 percent reduction of the
proposed penalties appears to have exceeded the guidelines
contained in the RCPP and were not justified based on
available documentation. (Draft Audit Report No. E1G68-09-
0188)
45
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EXHIBIT 2
Page 4 of 6
2. The regional negotiators adjusted the proposed penalty
of $550,000 ($525,00 for not manifesting and $25,000 for
illegal discharges) down to $45,000, or a 92 percent
adjustment. The region's explanation for reducing the
penalty was that the case evidence was inadequate to prove
that all 85,000 gallons of wastes disposed of were
hazardous. According to the penalty'policies, the burden of
proof rests with the violator. Thus, once cited, the
company should have had to prove that all 85,000 gallons of
waste were not hazardous.
The region had laboratory results from one grab sample which
showed the hazardous waste characteristics of the company
sample. The EPA inspector indicated that the sample was
representative of the company's waste stream. The inspector
also found that the company disposed of hazardous wastes for
21 days without the required RCRA manifests, which would be
an egregious violation. Regional records also showed that,
just prior to the subject infractions, the company violated
similar hazardous waste regulations by failing to analyze
generated solid wastes for hazardous characteristics and
failing to prepare hazardous waste manifests. This was
documented in a complaint issued against the company in June
1983. A CA/FO was executed with the company on August 29,
1-983, in which the company agreed to comply with the RCRA
generator regulations and submit waste analyses to the
regional office. However, the company continued to violate
the RCRA regulations while the terms of the previous CA/FO
were still in effect. Thus, the evidence showed the company
to be a repeat violator of RCRA and to have improperly
disposed of hazardous waste for 21 days.
The company, in response to the complaint, did not present
sufficient evidence to show that any of the generated wastes
were not hazardous. The company's behavior could be
described as concealment and compliance avoidance with
program regulations. We believe that the Region had a
preponderance of evidence that strongly supported the
proposed penalties. Regional personnel claimed, however,
that the region's evidence would not hold up before an
Administrative Law Judge hearing. In our opinion, this
conclusion was speculative and an inadequate basis to reduce
the proposed penalty so extensively.
The $45,000 final assessed penalty appeared to be an
arbitrary settlement for both violations cited in the
complaint. With regard to the mitigation of the $25,000
improper disposal penalty for the second violation, no
46
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EXHIBIT 2
Page 5 of 6
documentation was found to support the region's mitigation
of this penalty. We found no justification to reduce the
proposed penalties by more than $210,000 in total. The
region, however, reduced the proposed penalties by a total
of $505,000. (Draft Audit Report No. E1G68-09-0188)
CleanAir Act fCAA) Cases
Stationary Sources
1. A company accrued economic benefits of $900,000 over a
two and one-half year period of violations, but the region
reduced the amount to $14,000 because the company exceeded
its emission standard for only 15 days during this time.
Even though there were only 15 days of violation, the
company saved $900,000 by delaying the installation of the
pollution control equipment.
The region stated that the company did not continuously
violate the CAA and the civil penalty policy assumes
continuous violation of the statute is necessary. It is of
little consequence that the violations were on occasions or
on a continuous basis, the economic benefit from delayed
investment in pollution control equipment is the same.
EPA's policy is to recover the savings the violator received
from delayed and avoided costs. The CAA authorizes EPA to
assess penalties of up to $25,000 per day per violation for
noncompliance with program requirements; in this case
$375,000 (15 days times $25,000 per day). There should have
been a higher collection for the economic benefits in this
case. (EPA Audit Report No. E1K67-05-0449-80743)
2. A region investigated and documented numerous complaints
and violations at a facility engaged in open air
sandblasting operations. This activity led to improper
emissions affecting adjoining property owners.
The region issued a notice of violation in July 1985 and an
administrative order in October 1985. The administrative
order required the company to take substantive control
measures by erecting barriers or enclosing those areas in
which sandblasting was done to prevent further violations.
In August 1986 the region referred the case to the
Department of Justice (DOJ) for prosecution. A proposed
civil penalty of $60,791 was sought. The proposed penalty
included amounts for failure to take prompt corrective
action and a history of recalcitrance in complying with the
administrative order. The region established a proposed
bottom line figure of $20,000 for inability to pay.
47
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EXHIBIT 2
Page 6 of 6
During negotiations, four additional complaints were lodged
against the company for open-air sandblasting. The region
and DOJ offered to settle the case for $33,701 with credits
totaling $28,701 for cooperativeness and agreement to
proposed stipulated penalties in the CA/FO. The case was
settled for a total penalty assessment of only $5,000.
The CA/FO required the company to construct enclosures for
its sandblasting operation by April 1, 1989. These
enclosures had not been built as of April 1, 1989.
Inspections by regional officials have documented other
violations of the CA/FO. These documents support the
company's recalcitrance actions and apparent disregard for
the terms of the CA/FO. The company has for three years
violated the CAA without significant or apparent corrective
compliance action and has paid only minor penalties of
$5,000 for these violations. (Example from expanded audit
fieldwork.)
Asbestos National Emission Standard for Hazardous
Air Pollutants (NESHAP)
1. A region was notified of demolition work on buildings
containing asbestos. The contractor was aware that all work
was to be performed in accordance with the asbestos NESHAP
demolition and renovation regulations.
The region conducted an inspection of the site and found dry
asbestos in a torn container and on the ground, indicating
that the material had not been adequately wetted during
removal.
The region initiated proceedings against the contractor and
proposed a penalty of $39,279. The penalty included a 100%
upward adjustment to the gravity component for recalcitrance
in violating the regulations in the first instance and in
continuing to violate them after inspectors discussed the
initial violation with company representatives. The region
settled for $1,500, based upon the contractor's alleged
inability to pay the proposed penalty. Regional case files
did not contain documentation supporting the financial
inability to pay, nor did the files show that delayed
penalty payments were considered in lieu of a straight
deduction. (Example from expanded audit fieldwork.)
48
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m
APPENDIX 1
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON. D.C. 20460 , f ~5"""
AUG 3 |
OFFtCE OF ENFORCEMENT
AND COMPLIANCE
MOMTORING
MEMORANDUM
SUBJECT: Comments on Draft Audit Report
No. E1GBE9-05-0087-91***** "Capping Report on the
Computation, Negotiation, Mitigation and Assessment
of Penalties Under EPA Programs
FROM: Edward E. Reich _
Acting Assistant Administrator
TO: Ernest E. Bradley
Assistant Inspector General for Audit
Thank you for the opportunity to comment on this draft
report. My staff has reviewed it and their comments are
reflected in this memorandum. In addition to the following
general comments, I am including media specific comments
unique to TSCA and FIFRA as well as a 'pen and ink' mark-up
of your report.
I agree with your first recommendation concerning the
need for the Office of Enforcement and Compliance Monitoring
(OECM) and media program Assistant Administrators to reerapha-
size to Agency personnel the need to adhere fully to media
program penalty policies. I also agree with the recommen-
dation for more aggressive oversight of Regional activities.
I believe this can best be accomplished through expanding
the existing media program oversight audits conducted
periodically by each program office with OECM's participa-
tion. These program office reviews can be expanded and
modified to assess the adequacy of penalty computations
under applicable program penalty policies. It needs to
be made clear, however, that Headquarters resources will
not permit review of each penalty nor do we agree that
this would necessarily be an appropriate use of resources.
Oversight activities should include assuring that regions
have in place and are implementing adequate systems for
tracking and documenting penalty assessments and for
52
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- 2 -
assuring adherence to the guidelines spelled out in our penalty
policies. While your recommendation includes the Department of
Justice (DOJ), I cannot commit them to providing documentation
for reductions made in the course of negotiations with violators,
We do intend, however, to discuss with DOJ the need for appro-
priate documentation of the rationale for final penalties in
judicial cases.
The report also finds "[appropriate penalties were either
not calculated and assessed at all, or inadequately calculated,11
and "[tjhe Agency, in assessing penalties, had not complied
with either the letter or intent of the various penalty policies
in all cases." Since none of the case examples described have
any citation or identification, we were unable to address them
specifically. The report found that the economic benefit and
gravity components were not indicated on the Quick Look Report
and asserts that "failure to include the information in the
Quick Look Report indicates that the amounts may not have been
computed.11 Relying on the Quick Look Report to reach this
conclusion, however, shows a serious misunderstanding of how
the docket system is used in relation to penalty calculations.
Because we do not rely primarily on the docket system to
keep track of penalty calculations, no special emphasis is
placed on maintaining those particular data fields. The docket
mainly functions to keep track of the number of cases currently
in the system, the government attorneys assigned to them, which
provisions of the various statutes were violated, and other
matters. There are more specific and effective procedures in
place for keeping track of penalties of which you may not be
aware.
Headquarters requires in its Civil Penalty Policy that all
litigation reports contain penalty calculations which support
the proposed minimum settlement amount. Further, all regional
case files must contain documentation of the reasons for any
changes in the proposed settlement amount from the time the case
is initiated until a consent decree is signed. In addition,
Headquarters approval of all minimum settlement amounts is
required.
A Headquarters enforcement staff attorney is assigned to
every civil judicial case. One of their primary functions is
to monitor regional compliance with these procedures and the
penalty policy. Therefore, there is case-by-case monitoring
by Headquarters of regional compliance with the penalty policy
in civil judicial cases.
53
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- 4 -
Relative to State penalties, it is true that under the
Agency's "timely and appropriate enforcement response"
criteria, EPA can and does take independent enforcement action
if a State fails to assess any penalty (or assesses one which
is "grossly deficient") for violations for which program policy
requires penalties to be assessed. The 1986 Revised Policy
Framework on the State/Federal Enforcement Relationship requires
States to keep sufficient documentation so that the Regions can
determine whether an appropriate penalty was assessed.
In making this determination, EPA considers the State's
own penalty authority and any applicable penalty policy. It
should be noted, however, that while States are required to
have adequate penalty authorities, (but not the same procedures
as EPA), they are not required to assess the same penalty for a
particular violation as would EPA. Agency policy is very clear
on this point. However, EPA has been working with the States
to increase their penalty assessments by reviewing specific
cases through the oversight process, providing information on
penalties which EPA assesses, providing training on EPA's
computer program to compute the economic benefit of noncompli-
ance, encouraging them to develop their own formal penalty
policies, and providing information through the publication of
a summary of the environmental penalty authority of all States.
Your recommendation that the strategic Planning and
Management System (SPMS) show computed penalties, reductions by
Agency staff, reductions by DOJ and Agency staff and the final
assessed amounts would result in a significant workload increase.
In addition, there is tremendous opposition within the Agency
to expanding the scope of our accountability system. The
management emphasis is gradually shifting toward measures of
real program effectiveness, not simply numerical activity
indicators. I believe that the expanded program reviews dis-
cussed above would provide a preferable approach to oversight,
striking a balance between available resources, needed penalty
oversight, and measuring real environmental achievements.
We agree that the "Negotiation Skills Training" has been a
very successful course. Your statement on page 23 of the report,
however, noting that "[t]he course was last provided in FY 1987.
. . " is incorrect. The course was offered six times in FY 1988
and, so far, has been given seven times in FY 1989. OECM will
review the implications of making this training, or its equiva-
lent, mandatory for those attorneys engaged in enforcement
negotiations. Ij\ addition, training on the BEN and ABEL computer
models has been given twelve times since August of 1988, ten
times in regional offices and twice at Headquarters. The models
have also been presented in two States. We intend to continue to
support such training.
54
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- 5 -
I appreciate the opportunity to review this draft report
and I hope you find these comments helpful. Should you desire
clarification or additional information on any point please
contact Pat Alberico of my staff on 382-4540.
Attachments
55
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ATTACHMENT
Pesticides and Toxic substances Enforcement
On page 19 of your report you note that although no
detailed analysis was performed on penalties assessed under
the Toxic Substances Control Act (TSCA) or the Federal
Insecticide, Fungicide and Rodenticide Act (FIFRA), the
aggregate penalties for these programs in FY 87 were reduced,
on average, by 82% in TSCA and by 77% in FIFRA. You recom-
mended that OECM evaluate a sample of these cases to determine
if problems exist with negotiations. Within the relatively
short time to review this, OECM has evaluated these statistics
with the Office of Pesticides and Toxic Substance's Office of
Compliance Monitoring and has reached the following conclusions.
In the TSCA Program, a large percentage (over 50%) of
the 741 cases settled during FY 87, involved violations of
the Asbestos In Schools regulations, 40CFR 763 et seq. Because
the regulated community consists entirely of public and private
educational institutions, the Agency penalty policy recommended
that the penalties be substantially mitigated or even fully
abated if the school undertook asbestos abatement actions, which
were not required under TSCA or the Part 763 rules. This
approach was adopted by the Congress when it passed the Asbestos
Hazard Emergency Response Act (AHERA) or TSCA Title II in 1987,
to replace the Part 763 rule. Penalties under AHERA, by law,
must be remitted for educational institutions or paid into an
Asbestos Abatement Trust Fund which can be used by educational
institutions for additional abatement.
TSCA penalties must be reduced by statute, whenever they
may substantially affect a facility's "ability to continue in
business" or if there is a financial condition which prevents
their ability to pay the fine from cash reserves. These
provisions are found in TSCA Section 15. Before EPA will
consider reducing a penalty based upon ability to pay, EPA
enforcement offices are instructed to obtain credible financial
information, such as tax returns, corporate balance sheets or
other similar financial documentation.
Finally, TSCA penalties have been reduced in settlement
to obtain leverage for environmentally beneficial expenditures
as a condition of settlement. Generally, "settlements with
conditions" involve the implementation of compliance or abate-
ment activities which are unrelated to correcting the violation
that is the subject of the enforcement action (that is a cost
that can not be used to reduce the penalty) or implementation
56
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- 2 -
of a compliance audit. An example of a penalty mitigation
project might involve the accelerated removal and disposal
of PCB electrical equipment. A dollar for dollar credit is
not given. Some offices have given a $1.00 dollar reduction
for each $3.00 dollars spent up to a maximum penalty reduction.
With the increased emphasis in EPA on "pollution prevention",
it is anticipated that a greater number of cases may be settled
with conditions like these and care must be taken to insure
that adequate documentation is maintained in the official file
and that certification of completion is submitted and verified
to ensure that settlement terms are met.
To insure that penalty reductions are appropriately
documented, the TSCA Civil Penalty Policy published at 45 F.R.
24358 September 10, 1980, requires that the published work
sheet be completed to document each penalty reduction.
In the FIFRA program, a civil penalty matrix and categories
of violations was published in the Federal Register in 1974.
This guidance provides that the civil penalty to be imposed
must take into account the size of the violator's business.
EPA must then impose a graduated penalty based upon 5 category
sizes of business, the largest category being over $1,000,000
in gross sales. EPA Regional offices endeavor to place the
violator into the appropriate category through reliance on
the most readily accessible data, which are Dun and Bradstreet
financial reports. Often, however, at settlement conferences,
FIFRA violators are able to demonstrate through actual tax
returns or accounting statements that the Dun and Bradstreet
reports which are advisory and not based on actual certified
tax returns are inflated. Under FIFRA, by statute, EPA is
precluded from asking for tax returns or financial or sales
data at the time of inspection.
FIFRA penalties may also be reduced for factors similar
to TSCA; settlements with conditions or abatement activity,
although to a much lesser degree. Finally, a significant
factor in many FIFRA reduction concerns that type of violation
actually involved. The more hazardous misuse of pesticides
violation, by statute, are to be handled by the state lead
agencies, leaving Federal enforcement efforts to concentrate
on violations of misbranding (i.e. false labels or false
claims) or failure to submit annual production reports under
FIFRA. In a large proportion of these cases, perhaps 35%,
failure to file production reports occurs in either very
marginal businesses or businesses which are about to, or
have, ceased operations. In these cases, very minor fines
may be collected along with terminations or surrender of
the Registrant's FIFRA establishment number.
57
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APPENDIX 2
use;
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. Z0460
OFFICE OF
POLICY. PLANNING AND EVALUATION
MEMORANDUM
SUBJECT: Draft Audit Report No. E1GBE9-05-0087-91***** Capping
Report on the Computation, Negotiation, Mitigation, and
Assessment of Penalties Under EPA Program
FROM: Terry Davies, Assistant Administrator
Office of Policy, Planning, and Evaluation
TO: Assistant Inspector General for Audit
The following is in response to your request for comments on
the subject draft audit report. Our response is directed at
Finding NO. 2- PENALTY INFORMATION NEEDS TO BE PART OF EPA'S
STRATEGIC PIANNING AND MANAGEMENT SYSTEM REPORT, pages 27 - 30 Of
the draft audit report.
We understand that the recommendation suggests that detailed
operational information should be included in the Agency's
Strategic Planning and Management System (SPMS) concerning the
Office of Enforcement and Compliance Monitoring (OECM) and their
management of "... computation, negotiation, mitigation, and
assessment of penalties under EPA programs."
We agree partially with the recommendation in the draft report
in that SPMS should include measures that reflect agency program
and management performance of various functions including penalty
assessment. We have already initiated discussions with OECM
concerning this recommendation.
However, we would rather see the management of the OECM
functions strengthened and use the specific reporting
recommendation as part of their own management of agency penalty
program(s) rather than incorporating such specific details in the
agency-wide strategic Planning and Management system (SPMS).
We believe that such specific information, such as:
"...computed penalties, reductions by Agency staff, reductions by
Department of Justice and Agency staff, and the final assessed
amounts" should not be included in SPMS. Rather indicators of
performance by OECM in these and other related management areas
should be developed and included in SPMS.
58
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- 2-
The Accountability Systems Branch in the Office of Policy,
Planning and Evaluation (OPPE) will continue these initial
discussions with OECH and address the larger issues concerning
availability of data from States and Regions, feasibility of
collecting and reporting such data, and whether such data is
appropriate for inclusion in SPMS.
With regard to the inclusion of economic benefits components
in assessing penalties, the Office of Policy Analysis has developed
the benefit of noncompliance (BEN) model which can be used to
calculate these benefits. The report did not provide much detail
on why economic benefits components are or are not being included
in penalty assessments. If there is a need to advise the Regions
on how to calculate economic benefit or to follow-up on the use of
the BEN model, please contact Bill Painter (382-2756).
cc: Hank Schilling
Pant Stirling
Bob Currie
Chuck Kent
Dan Beardsley
Pat Alberico, OECM
59
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APPENDIX 3
DISTRIBUTION
Inspector General
(A-109)
Assistant Administrator for Air and Radiation
(ANR-443)
Assistant Administrator for Water
(WH-556)
Assistant Administrator for Pesticides and Toxic Substances
(TS-788)
Assistant Administrator for Solid Waste and Emergency Response
(WH-562)
Assistant Administrator for Policy, Planning, and Evaluation
(PM-219)
Office of General Counsel
(LE-130)
Comptroller
(PM-225)
Agency Followup Official
Attn: Director, Resource Systems Management Division
(PM-225)
Agency Followup Official
(PM-208)
Associate Administrator for Regional Operations
(A-101)
office of Public Affairs
(A-107)
Office of Congressional Liaison
(A-103)
60
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U.S EPA Headquarters Library
Mail code 3404T
1200 Pennsylvania Avenue NW
Washington, DC 20460
202-566-0556
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