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EPA's Auditing Policy
The EPA Audit Policy, (PDF, 262 KB, 11 pages, About pdf) formally titled “Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations,” safeguards human health and the environment by providing several major incentives for regulated entities to voluntarily come into compliance with federal environmental laws and regulations.
To take advantage of these incentives, regulated entities must voluntarily discover, promptly disclose to EPA, expeditiously correct, and prevent recurrence of future environmental violations. Disclosures are often preceded by consultation between EPA and the regulated entity, so that they can discuss mutually acceptable disclosure details, compliance, and audit schedules can be discussed.
Summary of Incentives: Significant penalty reductions. Civil penalties under the environmental laws generally have two components, an amount assessed based upon the severity or “gravity” of the violation, and the amount of economic benefit a violator received from failing to comply with the law.
- No gravity-based penalties if all nine of the Policy’s conditions are met. EPA retains its discretion to collect any economic benefit that may have been realized as a result of noncompliance.
- Reduction of gravity-based penalties by 75% where the disclosing entity meets all of the Policy’s conditions except detection of the violation through a systematic discovery process.
No recommendation for criminal prosecution for entities that disclose criminal violations if all of the applicable conditions under the Policy are met. “Systematic discovery” is not a requirement for eligibility for this incentive, although the entity must be acting in good faith and adopt a systematic approach to preventing recurring violations. Refer to the Audit Policy for a complete discussion of issues relating to disclosure of criminal violations.
No routine requests for audit reports would be made.
Conditions for Penalty Mitigation
Entities that satisfy the following conditions are eligible for Audit Policy benefits. Even if your entity fails to meet the first condition - systematic discovery - you can still be eligible for 75% penalty mitigation, and a recommendation for no criminal prosecution of the violations against your entity.
Systematic discovery of the violation through an environmental audit or the implementation of a compliance management system.
Voluntary discovery of the violation was not detected as a result of a legally required monitoring, sampling or auditing procedure.
Prompt disclosure in writing to EPA within 21 days of discovery or such shorter time as may be required by law. Discovery occurs when any officer, director, employee or agent of the facility has an objectively reasonable basis for believing that a violation has or may have occurred.
Independent discovery and disclosure before EPA or another regulator would likely have identified the violation through its own investigation or based on information provided by a third-party.
Correction and remediation within 60 calendar days, in most cases, from the date of discovery.
Prevent recurrence of the violation.
Repeat violations are ineligible, that is, the specific (or closely related) violations have occurred at the same facility within the past 3 years or those that have occurred as part of a pattern at multiple facilities owned or operated by the same entity within the past 5 years; if the facility has been newly acquired, the existence of a violation prior to acquisition does not trigger the repeat violations exclusion.
Certain types of violations are ineligible such as those that result in serious actual harm, those that may have presented an imminent and substantial endangerment, and those that violate the specific terms of an administrative or judicial order or consent agreement.
Cooperation by the disclosing entity is required.
Please refer to the Audit Policy, "Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations", 65 FR 19,618 (04/11/00) (PDF, 262 KB, 11 pages, About pdf) for a more detailed discussion of eligibility and the application of the Audit Policy. Additional information about the Audit Policy and its use is available from the following:
- "Audit Policy Update" Newsletter
The Audit Policy Update Newsletters, published between 1996-2001 by EPA's Office of Regulatory Enforcement, Office of Enforcement and Compliance Assurance provides information on the changes to the Audit Policy and other information relating to its use. - "Enforcement Alert" Newsletter
This informational newsletter published by EPA's Office of Civil Enforcement, Office of Enforcement and Compliance Assurance. It is intended to inform and educate the public and the regulated community about important environmental enforcement issues, recent trends, and significant enforcement actions. It calls attention to such matters as the need for voluntary corporate audits. - Questions and Answers concerning U.S. EPA's Audit Policy (also called Self-Disclosure Policy).
- Audit Policy Interpretive Guidance (January 1997) (PDF) (40 pp, 1 M, About pdf)
- Audit Policy: Frequently Asked Questions 2007 (PDF) (13 pp, 235 KB, About
PDF)
- Audit Policy Interpretive Guidance (January 1997) (PDF) (40 pp, 1 M, About pdf)
- Corporate Audit Agreements
A Corporate Audit Agreement allows an entity (such as corporation, university or other organization with many facilities or facility locations within its authority) to plan a corporate-wide or facility-wide audit with an advanced understanding between the entity and EPA regarding schedules for conducting the audit and disclosing violations beyond the current 21-day disclosure requirement for single-facility disclosures. In return for the advanced agreement of an audit and disclosure schedule, the facility would receive the benefits of EPA's Audit Policy as applicable. - Audit Policy Self-Disclosure & Regional Contacts
Once a violation has been discovered, a company has 21 days from the time of that discovery to disclose in writing the violation to EPA. The initial disclosure should identify the means of discovery, type of violation, and facility location.
Sample Documents for Use in Self-Disclosing Environmental Violations under EPA's Audit Policy
Sample Status Report (PDF, 97 KB, 5 pages, About pdf)
Some companies have used this report to provide information to EPA during the course of conducting an audit. The initial report, and subsequent periodic progress reports, have helped identify issues early in the auditing process and assisted in the overall progress of the audit.- Sample Disclosure Follow-up Letter (PDF, 98 KB, 5 pages, About pdf)
This is an example of what the Agency sends a company after receiving a self disclosure pursuant to EPA's Audit Policy. The letter provides companies with clear guidance on the kind of information needed by EPA to better understand the potential violations and determine whether a company's disclosure meets the conditions of the Audit Policy.
Audit Policy User's Survey (November 13, 1998)
Under a contract EPA conducted a voluntary and confidential survey of companies that have disclosed environmental violations under the EPA Audit Policy. The intent of the survey was to aide EPA to better serve the regulated community and to help EPA evaluate and improve the Audit Policy.
- Audit Policy Survey Invitation and Form (PDF, 179 KB, 9 pages, About pdf)
- Audit Policy Survey Results (PDF, 364 KB, 29 pages, About pdf)