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U.S. ENVIRONMENTAL PROTECTION AGENCY
OFFICE OF INSPECTOR GENERAL
EPA Needs to Update Its
Pesticide and Chemical
Enforcement Penalty
Policies and Practices
Report No. 13-P-0431
September 26, 2013
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Report Contributors:	Ganesa Curley
Jerri Dorsey
Jeffrey Harris
Lauretta A. Joseph
Calvin Lin
Steve Weber
Abbreviations
EPA	U.S. Environmental Protection Agency
ERP	Enforcement Response Policy
ERPP	Enforcement Response and Penalty Policy
FIFRA	Federal Insecticide, Fungicide, and Rodenticide Act
FY	Fiscal Year
OECA	Office of Enforcement and Compliance Assurance
OIG	Office of Inspector General
PCB	Polychlorinated Biphenyls
TSCA	Toxic Substances Control Act
Cover photo: A farmer mixes herbicide prior to application; the farmer wears complete
protection while using the chemicals. (U.S. Department of Agriculture's
National Resources Conservation Service photo)
Hotline
To report fraud, waste, or abuse, contact us through one of the following methods:
email: OIG Hotline@epa.gov	write: EPA Inspector General Hotline
phone: 1-888-546-8740	1200 Pennsylvania Avenue, NW
fax:	202-566-2599	Mailcode 2431T
online:
http://www.epa.gov/oiq/hotline.htm
Washington, DC 20460

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*	' U.S. Environmental Protection Agency	13-P-0431
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At a Glance
Why We Did This Review
The purpose of this review
was to evaluate how the
U.S. Environmental Protection
Agency's (EPA's) Federal
Insecticide, Fungicide, and
Rodenticide Act (FIFRA) and
Toxic Substances Control Act
(TSCA) enforcement tools
achieve intended outcomes;
and whether penalty
negotiations are managed to
protect human health and the
environment. This briefing
report contains findings and
recommendations related to
FIFRA and TSCA good faith
reductions and ability to pay
penalties. FIFRA regulates the
distribution, sale and use of
pesticides. TSCA provides the
EPA with authority to require
reporting, recordkeeping and
testing requirements, and
restrictions to chemical
substances and mixtures.
This report addresses the
following EPA theme:
• Taking action on toxics and
chemical safety.
For further information,
contact our public affairs office
at (202) 566-2391.
The full report is at:
www.epa.qov/oiq/reports/2013/
20130926-13-P-0431.pdf
EPA Needs to Update Its Pesticide and Chemical
Enforcement Penalty Policies and Practices
What We Found
We found that EPA regions differed in how they documented decisions and
justified penalties related to FIFRA and TSCA enforcement penalty reductions.
EPA regions generally did not consistently determine and document reductions in
proposed penalties based on good faith of the violators, and in some regions
reductions appeared automatic without adequate justification. The lack of
adequate guidance for determining good faith reductions and supporting
documentation for good faith reductions creates a risk that violators may not be
treated equitably. In addition, EPA may be losing opportunities to fully collect all
penalties due.
We found that the EPA lacks a sufficient policy to address violators who are
unable to pay FIFRA and TSCA penalties. The current "ability to pay" model and
policy are limited to cases where an individual may not have the cash to pay a
penalty. However, no guidance exists for applying non-monetary penalty
alternatives such as public service for FIFRA and TSCA inability to pay cases
when cash is not available to pay a penalty. Also, training for enforcement staff
needs to be updated to include more guidance on ability to pay cases. Therefore
EPA's enforcement actions for FIFRA and TSCA ability to pay cases may be
limited by its outdated policy, model and training, which could impact the regions'
consistent handling of the growing number of ability to pay claims being received
from individuals.
Recommendations and Planned Corrective Actions
We recommend that the EPA provide adequate guidance for determining a good
faith reduction, develop a systematic approach to ensure that justifications for
good faith reductions are documented, revise the EPA's ability to pay penalty
policy and evaluate the individual violator model, and provide regional staff with
updated training for case development.
The Office of Enforcement and Compliance Assurance agreed with two of our
five recommendations and provided alternative actions that meet the intent of the
remaining recommendations. All recommendations are resolved and open with
corrective actions underway. No further response to this report is required.

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UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
WASHINGTON, D.C. 20460
THE INSPECTOR GENERAL
September 26, 2013
MEMORANDUM
SUBJECT: EPA Needs to Update Its Pesticide and Chemical Enforcement Penalty
Policies and Practices
Report No. 13-P-0431
FROM: Arthur A. Elkins Jr.
TO:
Cynthia Giles, Assistant Administrator
Office of Enforcement and Compliance Assurance
This is a report on the subject evaluation conducted by the Office of Inspector General (OIG) of the
U.S. Environmental Protection Agency (EPA). This report contains findings that describe the problems
the OIG has identified and corrective actions the OIG recommends. This report represents the opinion of
the OIG and does not necessarily represent the final EPA position. Final determinations on matters in
this report will be made by EPA managers in accordance with established audit resolution procedures.
Action Required
You are not required to provide a written response to this final report because you provided agreed-to
corrective actions and planned completion dates for the report recommendations. The OIG may make
periodic inquiries on your progress in implementing these corrective actions. Should you choose to
provide a final response, we will post your response on the OIG's public website, along with our
memorandum commenting on your response. You should provide your response as an Adobe PDF file
that complies with the accessibility requirements of Section 508 of the Rehabilitation Act of 1973, as
amended.
We will post this report to our website at http://www.epa.gov/oig.
If you or your staff have any questions regarding this report, please contact Assistant Inspector General
for Program Evaluation Carolyn Copper at (202) 566-0829 or copper.carolyn@epa.gov; or Acting
Director for Toxics, Chemical Management, and Pollution Prevention Evaluations Jerri Dorsey at
(919) 541-3601 or dorsev.ierri@epa.gov.

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Purpose
•	The purpose of this review was to evaluate how
U.S. Environmental Protection Agency (EPA) Federal
Insecticide, Fungicide, and Rodenticide Act (FIFRA) and
Toxic Substances Control Act (TSCA) enforcement tools
achieve intended outcomes; and whether penalty
negotiations are managed to protect human health and
the environment.
•	This briefing contains findings and recommendations
related to FIFRA and TSCA:
-	Good faith reductions
-	Ability to pay
13-P-0431

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Background
•	FIFRA regulates the distribution, sale and use of
pesticides.
•	TSCA, which excludes pesticide regulation, provides the
EPA with authority to require reporting, recordkeeping
and testing requirements; and restrictions to chemical
substances and mixtures.
•	Enforcing environmental laws is part of the EPA's
mission to protect human health and the environment.
13-P-0431

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Background
Enforcement Response Policies (ERPs)
FIFRA and TSCA enforcement policies level the playing field
by providing fair and consistent enforcement of companies
nationwide.
• FIFRA
- To provide fair and
equitable treatment of the
regulated community,
including:
•	Predictable enforcement
responses.
•	Fair penalty assessments.
•	Swift resolution of
environmental problems.
•	Deterrence of future
violations.
13-P-0431	3
• TSCA
- To assure that
penalties are:
•	Equitable and
consistent.
•	Eliminate economic
incentives to violate.
•	Deter violations.

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Background
Lead Paint Disclosure Rule
•	This rule requires disclosure of known lead-based paint
and/or lead-based paint hazards by persons selling or leasing
housing constructed prior to 1978.
•	Exposure to lead can contribute to elevated blood lead levels
for children living in properties where lead paint exists due to
lack of notification of possible existence of lead paint as
required by EPA's Lead Rule.
•	According to the Centers for Disease Control and Prevention,
childhood lead poisoning is the most preventable
environmental disease among children under age 6. Even low
levels of lead exposure can cause developmental problems
such as learning disabilities, decreased intelligence and
behavioral problems.
13-P-0431

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Methodology
• We selected a judgmental sample of 43 out of 290 FIFRA
and TSCA Fiscal Year (FY) 2010 closed enforcement cases.
This involved 23 FIFRA cases and 20 TSCA cases. The
20 TSCA cases involved 13 Lead Disclosure and 7 PCB
(Polychlorinated Biphenyl) cases.
—	FIFRA enforcement penalties analyzed/addressed the sale
of unregistered pesticides and label violations.
—	TSCA enforcement penalties analyzed/addressed the
improper use and management of PCBs in schools, and
the implementation of the Lead Paint Disclosure Rule in
households.
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Methodology
•	We reviewed FIFRA and TSCA statutes, as well as the
applicable enforcement policies, processes and criteria.
•	We conducted interviews of Office of Enforcement and
Compliance Assurance (OECA) staff (specifically, the
Waste and Chemical Enforcement Division and the Office
of Compliance); as well as enforcement staff from EPA
Regions 2, 4, 5, 7 and 10.
•	We performed our evaluation from June 2011 to May
2013 in accordance with generally accepted government
auditing standards. Those standards require that we plan
and perform the evaluation to obtain sufficient and
appropriate evidence.
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Finding
Good Faith Reductions Lacked Support
•	We found that EPA regions differed in how they
documented and justified reduced penalties for sampled
FIFRA and TSCA enforcement cases.
•	Specifically, regions in general did not sufficiently document
and/or justify good faith reductions to proposed penalties.
•	Furthermore, the agency has not provided regions, who
administer the enforcement process, guidance or policies
that adequately delineate the processes to document the
reduction of a penalty, establish the appropriate level of
reduction for good faith, and assure that the reductions are
in line with behavior of the respondent.
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Finding
Good Faith Reductions Lacked Support (cont.)
•	Documentation within case files generally did not clearly delineate
why and how reductions for good faith were determined.
•	One region used nothing more than a simple statement for
justification. For example one region wrote, "...A 30% reduction is
recommended based on respondent's cooperation and good faith
efforts to comply/'
•	Another regional justification stated, "...We are also giving the 20%
reduction for good faith.../'
•	EPA policy, states: "...In all instances, the facts and rationale
justifying penalty reduction must be recorded in the case file and
included in any memoranda accompanying settlement/'
(A Framework for Statute-Specific Approaches to Penalty
Assessment: Implementing EPA's Policy on Civil Penalties,
February 16, 1984)
•	Without adequate documentation to justify reductions, there is no
assurance that reduction decisions are consistent across like
violators.
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Conclusion/Recommendations
Good Faith Reductions
We concluded that the lack of adequate guidance for
determining good faith reductions and adequate
documentation for good faith reductions creates a risk
that violators may not be treated equitably. In addition,
EPA may be losing opportunities to fully collect all
penalties due.
Recommendations:
We recommend that the Assistant Administrator for Enforcement and
Compliance Assurance:
1.	Provide guidance for determining good faith reductions.
2.	Develop an approach to ensure justifications for good faith
reductions are adequately documented.
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Conclusion/Recommendations
Good Faith Reductions (cont.)
Agency Response and OIG Evaluation
Agency Response to Recommendation 1:
The agency did not concur with recommendation 1 to update guidance for determining
good faith reductions. Based on discussions with the agency on the draft report, it was
agreed that the corrective actions to remedy recommendation 2, the re-issuance of
GM-88 - "Documenting Penalty Calculations and Justifications in EPA Enforcement
Actions" - will also address the condition of inadequate guidance. GM-88 will augment
the current FIFRA and TSCA Enforcement Response Penalty Policies (ERPPs). The regions
will utilize both the ERPs and GM-88 as guidance to determine and support reductions
to penalties for good faith.
OIG Evaluation:
The agency's corrective actions address the intent of the recommendation. Therefore,
the OIG considers this recommendation to be resolved.
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Conclusion/Recommendations
Good Faith Reductions (cont.)
Agency Response and OIG Evaluation (cont.)
Agency Response to Recommendation 2:
The agency concurs with recommendation 2 and provided a planned corrective action
plan and a completion date.
OIG Evaluation:
We concur with this action. The agency provided a corrective action plan and
completion date for this action. Therefore, the OIG considers this recommendation to
be resolved.
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Finding
Challenges Exist for Ability to Pay Cases
We found that the EPA's enforcement actions for FIFRA and
TSCA ability to pay cases may be limited by an outdated
policy, model and training.
• EPA's ERPP does not prescribe alternatives (such as public
service and payment plans) when a penalty cannot be
paid.
-	Although alternatives are allowed, the current lead-based paint
disclosure ERPP only provides guidance on penalty reductions.
It does not include when and how alternatives can be used.
-	Consequently, if EPA does not apply a non-monetary alternative
form of payment when a violator is unable to pay, enforcement
against noncompliance is absent.
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Finding
Challenges Exist for Ability to Pay Cases (cont.)
o EPA's "INDIPAY" economic model is limited in its
ability to help teams evaluate claims for FIFRA/TSCA
ability to pay cases.
—	INDIPAY is intended to evaluate individual taxpayers'
claims of inability to afford penalties, clean-up costs or
compliance costs.
—	Currently, the model does not assess an individual's
assets.
—	An updated model could help improve the accuracy of
the agency's ability to pay claims.
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Finding
Challenges Exist for Ability to Pay Cases (cont.)
o EPA does not provide adequate guidance or training on
evaluating ability to pay claims for case teams.
—	OECA does not currently provide any case development
training.
—	The EPA guidance is inadequate for case teams or financial
analysts on how to handle claims for individuals, except for
under the Superfund program.
—	Lack of adequate guidance and training could impact the
regions' consistent handling of the growing number of
ability to pay claims being received from individuals.
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Conclusion/Recommendations
Ability to Pay
EPA needs to update its policy to better address violators who are
unable to pay penalties.
Recommendations:
We recommend that the Assistant Administrator for Enforcement
and Compliance Assurance:
3.	Update the existing Lead-Based Paint Disclosure ERPP to
include guidance on:
a.	How to evaluate ability to pay claims for individuals, and
b.	When and how to apply alternatives such as payment plans and
public service to ability to pay cases.
4.	Evaluate the INDIPAY economic model to determine
whether revisions would improve applicability to lead
paint disclosure cases with individual violators.
5.	Provide regional staff with updated training for case
development, including evaluation of ability to pay claims.
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Conclusion/Recommendations
Ability to Pay (cont.)
Agency Response and OIG Evaluation
Agency Response to Recommendation 3:
The agency provided alternative actions in lieu of the OIG recommendation 3. The
agency recommended updating the 1986 "Guidance on Determining a Violator's Ability
to Pay a Civil Penalty" guidance instead of the Lead-Paint Disclosure ERPP.
OIG Evaluation:
We concur with the alternative corrective action provided by the agency. Therefore, the
OIG considers this recommendation to be resolved.
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Conclusion/Recommendations
Ability to Pay (cont.)
Agency Response and OIG Evaluation (cont.)
Agency Response to Recommendation 4:
The agency in its response advised that the INDIPAY model "is not suitable" for these
types of real estate fact-specific analyses. However, the agency believes that it is not
necessary to update the INDIPAY model to address its limitations relating to the
valuation of real estate assets. Based on discussions with the agency, the agency has
agreed to update the 1986 "Guidance on Determining a Violator's Ability to Pay a Civil
Penalty," which it believes will have more significant impact across the agency than
updating the model.
OIG Evaluation:
We concur with the alternative corrective action provided by the agency. Therefore, the
OIG considers this recommendation to be resolved.
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Conclusion/Recommendations
Ability to Pay (cont.)
Agency Response and OIG Evaluation (cont.)
Agency Response to Recommendation 5:
The agency concurs with recommendation 5 and provided a corrective action plan and
completion date.
OIG Evaluation:
We concur with this action. The agency provided a corrective action plan and
completion date for this action. Therefore, the OIG considers this recommendation to
be resolved.
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Status of Recommendations and
Potential Monetary Benefits
RECOMMENDATIONS
POTENTIAL MONETARY
BENEFITS (In $000s)
Rec.
No.
Page
No.
Subject
Status1
Action Official
Provide guidance for determining good faith
reductions.
Develop an approach to ensure justifications for
good faith reductions are adequately documented.
15 Update the existing Lead-Based Paint Disclosure
ERPP to include:
a.	How to evaluate ability to pay claims for
individuals, and
b.	When and how to apply alternatives such as
payment plans and public service to ability to
pay cases.
15 Evaluate the INDIPAY economic model to
determine whether revisions would improve
applicability to lead paint disclosure cases with
individual violators.
Assistant Administrator for
Enforcement and
Compliance Assurance
Assistant Administrator for
Enforcement and
Compliance Assurance
Assistant Administrator for
Enforcement and
Compliance Assurance
Assistant Administrator for
Enforcement and
Compliance Assurance
Planned
Completion
Date
Claimed
Amount
Ag reed-To
Amount
9/30/13
9/30/13
6/30/14
6/30/14
15 Provide regional staff with updated training for case
development, including evaluation of ability to pay
claims.
Assistant Administrator for
Enforcement and
Compliance Assurance
9/30/14
O = recommendation is open with agreed-to corrective actions pending
C = recommendation is closed with all agreed-to actions completed
U = recommendation is unresolved with resolution efforts in progress
13-P-0431	19

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Appendix A
Agency Response to Draft Report
July 3, 2013
MEMORANDUM
SUBJECT: Response to the Office of Inspector General Draft Report: "EPA Needs to Update
Its Pesticide and Chemical Enforcement Penalty Policies and Practices," dated
June 6, 2013, Report No. OPE-FY11-0018
FROM: Cynthia Giles
Assistant Administrator
TO:	Carolyn Copper
Assistant Inspector General
Office of Program Evaluation
Thank you for the opportunity to respond to the draft findings and recommendations presented in
the Office of Inspector General (OIG) Draft Report, "EPA Needs to Update Its Pesticide and
Chemical Enforcement Penalty Policies and Practices" (Report). Following is a summary of
comments from the Office of Enforcement and Compliance Assurance (OECA), followed by
OECA's position on each of the Report's recommendations. For those Report recommendations
with which OECA agrees, we propose corrective actions and estimated completion dates. For
those Report recommendations with which OECA does not agree, we explain our position and
either propose alternatives to those recommendations or, in the case of Recommendation 1, we
propose that no further action is needed.
Summary Comments
The TSCA cases addressed in OIG's Report involved the Lead-Based Paint Disclosure Rule. It is
important to note that the focus of the lead enforcement program has shifted away from lead
disclosure cases and toward renovation, repair, and painting (RRP) cases. As noted in the 2014
National Program Managers' Guidance, 95 percent of lead enforcement resources should be
allocated to RRP enforcement. With this shift in focus, OECA has worked with the regions to
ensure national consistency in penalty calculations and documentation.
OIG Response: The OIG did not solely review Lead-Based Paint Disclosure Rule cases.
The OIG reviewed 43 cases, of which 23 were FIFRA cases, seven were TSCA PCB cases,
and 13 were TSCA Lead-Based Paint Disclosure Rule cases. The results of the OIG review
disclosed that the lack of guidance and supporting documentation for good faith reductions
pertained to both FIFRA and TSCA cases. Recommendations 1 and 2 relate to both FIFRA
and TSCA policies.
13-P-0431
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Recommendation 1: OECA disagrees with the OIG's recommendation that OECA update the
criteria in the Lead-Based Paint Disclosure Rule Enforcement Response and Penalty Policy (LBP
Disclosure ERPP) for determining good-faith reductions. While the Report states that
documentation for good-faith reductions in case files was inadequate, the Report does not
identify any specific deficiencies with regard to the criteria themselves. Therefore, rather than
revising the guidance related to criteria for good-faith reductions in LBP Disclosure Rule cases,
which are increasingly rare, OECA will continue to work with the regions on national
consistency in RRP cases.
OIG Response: The OIG met with the agency to discuss the draft findings and
recommendations. Based on discussions with the agency, it was agreed that the corrective
actions to remedy recommendation 2, the re-issuance of GM-88, "Documenting Penalty
Calculations and Justifications in EPA Enforcement Actions," will also address the
condition of lack of guidance. GM-88 will augment the current FIFRA and TSCA ERPPs.
The regions will utilize both the ERPPs and GM-88 as guidance to determine and support
reductions to penalties for good faith. The agency's corrective actions address the intent of
the recommendation. Therefore, the OIG considers this recommendation to be resolved.
Recommendation 2: In order to ensure justifications for good faith reductions are adequately
documented in case files, OECA will re-circulate GM-88, "Documenting Penalty Calculations
and Justifications in EPA Enforcement Actions," to Enforcement Directors and Regional
Counsel.
OIG Response: We concur with the corrective action provided by the agency and thus
consider this recommendation to be resolved.
Recommendation 3.a: In its Report, the OIG found that "[tjhere is no EPA guidance for case
teams or financial analysts on how to handle claims for individuals, except for under the
Superfund program." See Report at 13. To address this finding, the OIG recommends that OECA
update the existing LBP Disclosure ERPP to include guidance on how to evaluate ability-to-pay
claims for individuals.
OECA disagrees with OIG's statement that there is no EPA guidance on how to handle claims
for individuals. In addition to the 1986 "Guidance on Determining a Violator's Ability to Pay a
Civil Penalty," the EPA developed the INDIPAY model specifically for the purpose of assisting
case teams in evaluating ability to pay claims by individuals. OECA does agree, however, that
additional guidance may be needed on whether and the extent to which the EPA should assess a
civil penalty where the INDIPAY model assesses an individual's ability to pay as zero.
OIG Response: The OIG revised the final report to more accurately reflect the above
statements regarding the lack of guidance. The OIG concurs that additional guidance is
needed that adequately addresses the extent to which the EPA should assess a civil penalty
where the INDIPAY model assesses an individual's ability to pay as zero.
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OECA plans to update the 1986 "Guidance on Determining a Violator's Ability to Pay a Civil
Penalty." As part of that effort, OECA will consider whether more guidance is needed on (1)
how to evaluate ability-to-pay claims in enforcement cases against individuals, and (2) when to
allow a respondent/defendant to pay a civil penalty in installments and how best to structure
settlement agreements with delayed payment schedules.
OIG Response: We concur with the alternative corrective action provided by the agency and
thus consider this recommendation to be resolved.
Recommendation 3.b: After finding that EPA's LBP Disclosure ERPP "does not prescribe
alternatives (such as public service and payment plans)," the OIG recommends that OECA
update the LBP Disclosure ERPP "to include when and how to apply alternatives such as
payment plans and public service to ability to pay cases." (See OIG Draft Report at 11 and 15.)
This OIG recommendation appears to be drawn from references in the EPA's 1984 "A
Framework for Statute-Specific Approaches to Penalty Assessments: Implementing EPA's
Policy on Civil Penalties" (Framework or "GM-22") to the Agency's consideration of "a delayed
payment schedule" or "non-monetary alternatives, such as public service activities" when a
violator cannot afford to pay a civil penalty. (See Framework at 23.)
Delayed Payment Schedules
OECA plans to update the 1986 "Guidance on Determining a Violator's Ability to Pay a Civil
Penalty." As part of that effort, OECA will consider whether more guidance is needed on (1)
how to evaluate ability-to-pay claims in enforcement cases against individuals, and (2) when to
allow a respondent/defendant to pay a civil penalty in installments and how best to structure
settlement agreements with delayed payment schedules.
Non-monetary Alternatives
Since issuing the 1984 Framework, the EPA issued the 1998 Supplemental Environmental
Projects (SEP) Policy. A SEP is a beneficial environmental project a respondent/defendant
agrees to undertake as part of an enforcement settlement. The project must be one that the
respondent/ defendant is not already required to perform. As a matter of fiscal law, SEPs must
have a nexus to the underlying violation and cannot augment the EPA's or another agency's
appropriations. Provided a project meets the conditions of the SEP Policy, the EPA may consider
a respondent/defendant's agreement to perform a SEP as a factor in determining the civil penalty
to be assessed. Furthermore, EPA has provided specific guidance on the SEPs that may be
appropriate in cases involving violations of lead-based paint rules under TSCA.1
Finally, TSCA Section 16(a)(2)(C), 15 U.S.C. § 2615(a)(2)(C), authorizes the Administrator to
compromise, modify or remit, with or without condition, any civil penalty that may be imposed
1 See August 2010 "Consolidated Enforcement Response and Penalty Policy for the Pre-Renovation Education Rule;
Renovation, Repair and Painting Rule; and Lead-Based Paint Activities Rule" (LBP Consolidated ERPP) at 26 and
Appendix D.
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under this section. The EPA has issued policy on implementing this subsection.2 As discussed in
the August 2010 LBP Consolidated ERPP, an example of this policy would be the remittance of
a portion of the unadjusted gravity-based penalty developed for violations of the RRP rule in
consideration of the violator's acceptance of the suspension or revocation of the its LBP
certification or training authorization. According to the LBP Consolidated ERPP, the violator
would still be liable for a penalty for any economic benefit accrued as a result of the violation(s).
In addition, the terms of the remittance and suspension or revocation must be incorporated in a
Compliance Agreement and Final Order. Finally, the LBP Consolidated ERPP notes that TSCA
Section 16(a)(2)(C) may also be used to remit penalties if respondent completes projects similar
to those implemented under the SEP Policy.
Rather than revise the LBP Disclosure ERPP, OECA proposes to evaluate whether additional
guidance is needed to clarify whether "non-monetary alternatives, such as public service
activities," must meet the SEP Policy.
OIG Response: We concur with the alternative corrective action provided by the agency and
thus consider this recommendation to be resolved.
Recommendation 4: In support of Recommendation 4 — that OECA evaluate the INDIPAY
model "to determine whether revisions would improve the applicability to lead disclosure cases
with individual violators" — the OIG found that "[cjurrently, the model does not assess an
individual's assets." We disagree with this finding and the OIG's recommendation that changes
to INDIPAY are necessary to "assess an individual's assets." Contrary to the OIG's draft finding,
the INDIPAY model does take into account an individual's assets in assessing an individual's
ability to pay based on information provided by the respondent/defendant. The reason the model
is not equipped to provide the user with the assessed value of an individual's specific assets is
that such determinations are very case-specific and based on market value. For example, the
market value of real estate is based on an evaluation of the property (e.g., square footage,
purpose, condition, improvements) and an assessment of its value in the market in which it is
located at a particular point in time.
Because the model is not suitable for this kind of fact-specific analysis, OECA proposes that no
further action is needed to update the INDIPAY model. Where appropriate in a particular case,
the EPA may engage an expert to assess the value of a respondent/defendant's assets. If EPA
decides to expend resources in a given case to estimate the value of specific assets, such values
can then be loaded into the model to fine-tune the ability-to-pay analysis of a particular
individual.
OECA will consider whether more guidance is needed on how to evaluate ability-to-pay claims
in enforcement cases against individuals, as part of OECA's update of the Agency's 1986
"Guidance on Determining a Violator's Ability to Pay a Civil Penalty."
2 See Appendix C, TSCA Enforcement Policy and Guidance Documents; Memorandum, "Settlement with
Conditions," A.E. Conroy II (November 16, 1983).
13-P-0431
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OIG Response: As noted by the agency in its response, the current model "is not suitable"
for these types of fact-specific analysis. However, the agency believes that it is not
necessary to update the INDIPAY model to address its limitations relating to the valuation
of real estate assets. Based on discussions with the agency, the agency has agreed to update
the 1986 "Guidance on Determining a Violator's Ability to Pay a Civil Penalty," which it
believes will have more impact than updating the model. We concur with the alternative
corrective action provided by the agency and thus consider this recommendation to be
resolved.
Recommendation 5: As indicated, OECA plans to update the 1986 "Guidance on Determining
a Violator's Ability to Pay a Civil Penalty." Once that updated guidance is issued, OECA will
provide training on evaluating a violator's ability to pay a civil penalty to reflect the new
guidance.
OIG Response: We concur with the corrective action provided by the agency and thus
consider this recommendation to be resolved.
In Agreement
No.
Recommendation
High-Level Intended
Corrective Action(s)
Estimated Completion
by Quarter and FY
2
Develop a systematic
approach to ensure
justifications for good faith
reductions are adequately
documented.
OECA will re-circulate to the
Enforcement Directors and
Regional Counsel existing
guidance on the documentation
of penalties in case files. See
memorandum dated August 9,
1990, "Documenting Penalty
Calculations and Justifications
in EPA Enforcement Actions,"
from the former Assistant
Administrator for
Enforcement, James M. Strock.
4th Quarter of FY 2013
5
Provide regional staff with
updated training for case
development, including
evaluation of ability to pay
claims.
OECA plans to update the
1986 "Guidance on
Determining a Violator's
Ability to Pay a Civil Penalty."
Once that updated guidance is
issued, OECA will provide
training on evaluating a
violator's ability to pay a civil
penalty to reflect the new
guidance.
4th Quarter of FY 2014
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Not in Agreement
No.
Recommendation
Agency Explanation/Response
Proposed Alternative
Recommendation
1
Update criteria for
determining good faith
reductions.
The criteria for determining
good faith reductions are sound
and readily accessible in the
Lead-Based Paint Disclosure
Rule ERPP.
No further action
proposed.
3.a.
Update Lead-Based Paint
Disclosure ERPP to
include guidance on how
to evaluate ability to pay
for individuals.
The issue of how to evaluate
ability to pay claims for
individuals is not limited to the
enforcement of TSCA's Lead-
Based Paint Disclosure Rule.
Rather, whether a violator can
afford to pay a civil penalty in
addition to correcting
noncompliance can arise in the
enforcement of other
environmental requirements
under TSCA and other statutes.
Because this issue is cross-
media in nature, it should be
addressed on a cross-media
basis in lieu of revising the
Lead-Based Paint Disclosure
Rule ERPP.
OECA plans to update
the 1986 "Guidance on
Determining a Violator's
Ability to Pay a Civil
Penalty." As part of that
effort, OECA will
consider whether more
guidance is needed on (1)
how to evaluate ability-
to-pay claims in
enforcement cases
against individuals, and
(2) when to allow a
respondent/defendant to
pay a civil penalty in
installments and how best
to structure settlement
agreements with delayed
payment schedules.
3rd Quarter of FY 2014
3.b.
Update Lead-Based Paint
Disclosure ERPP to
include guidance on when
and how to apply payment
plans in ability to pay
cases.
The issues of when to consider
and how to structure delayed
penalty payments are not
limited to lead-based paint
disclosure cases but can arise
regardless of which statutory
penalty authority is being
enforced.
OECA plans to update
the 1986 "Guidance on
Determining a Violator's
Ability to Pay a Civil
Penalty." As part of that
effort, OECA will
consider whether more
guidance is needed on (1)
how to evaluate ability-
to-pay claims in
enforcement cases
against individuals, and
(2) when to allow a
respondent/defendant to
pay a civil penalty in
installments and how best
to structure settlement
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agreements with delayed
payment schedules.
3rd Quarter of FY 2014
3.b.
Update Lead-Based Paint
Disclosure ERPP to
include guidance on when
and how to apply
"alternatives... such as
public service in ability to
pay cases."
This OIG recommendation
appears to be drawn from a
reference in EPA's 1984 "A
Framework for Statute-Specific
Approaches to Penalty
Assessments: Implementing
EPA's Policy on Civil
Penalties" (Framework) to
"non-monetary alternatives"
when a violator cannot afford to
pay a civil penalty. (See
Framework at page 23.)
In 1998, EPA issued the
Supplemental Environmental
Projects (SEP) Policy. A SEP is
a beneficial environmental
project a respondent/defendant
agrees to undertake voluntarily
as part of an enforcement
settlement. The project must be
one that the respondent/
defendant is not already
required to perform. As a matter
of fiscal law, SEPs must have a
nexus to the underlying
violation and cannot augment
EPA's or another agency's
appropriations.
Rather than revise the
Lead-Based Paint
Disclosure ERPP, OECA
proposes to evaluate
whether additional cross-
media guidance is needed
to clarify whether "non-
monetary alternatives,
such as public service
activities" must meet the
SEP Policy.
2nd Quarter of FY 2014
4
Evaluate the INDIPAY
economic model to
determine whether
revisions would improve
applicability to lead paint
disclosure cases with
individual violators.
This recommendation is based
on the OIG's draft finding that
"[cjurrently, the [INDIPAY]
model does not assess an
individual's assets." We
disagree with this finding and
the OIG's recommendation that
changes to INDIPAY are
necessary to "assess an
individual's assets." The
INDIPAY model does take into
account an individual's assets in
assessing an individual's ability
3rd Quarter of FY 2014
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to pay based on information
provided by the
respondent/defendant. The
model is not the appropriate tool
for assigning a dollar value to
an individual's specific assets,
which is fact-specific and based
on market value.
OECA will consider whether
more guidance is needed on
how to evaluate ability-to-pay
claims in enforcement cases
against individuals, as part of
OECA's update of the Agency's
1986 "Guidance on
Determining a Violator's
Ability to Pay a Civil Penalty."
See response to
Recommendation 3.b.
Contact Information
If you have any questions or concerns regarding this response, please contact the OECA Audit
Liaison, Gwendolyn Spriggs, at 202-564-2439.
Attachment
cc: Lawrence Starfield, OECA
Susan Shinkman, OECA/OCE
Pam Mazakas, OECA/OCE
Rosemarie Kelley, OECA/OCE
Andrew Stewart, OECA/OCE
Susan O'Keefe, OECA/OCE
Caroline Makepeace, OECA/OCE
Lauren Kabler, OECA/OCE
Gwendolyn Spriggs, OECA/OAP
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Appendix B
Distribution
Office of the Administrator
Assistant Administrator for Enforcement and Compliance Assurance
Assistant Administrator for Chemical Safety and Pollution Prevention
Agency Follow-Up Official (the CFO)
Agency Follow-Up Coordinator
General Counsel
Associate Administrator for Congressional and Intergovernmental Relations
Associate Administrator for External Affairs and Environmental Information
Principal Deputy Assistant Administrator for Enforcement and Compliance Assurance
Deputy Assistant Administrator for Chemical Safety and Pollution Prevention
Audit Follow-Up Coordinator, Office of Enforcement and Compliance Assurance
Audit Follow-Up Coordinator, Office of Chemical Safety and Pollution Prevention
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