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Outline of EPA's Audit Policy Including the "Interim Approach"

Printable version of Outline of EPA's Audit Policy Including the "Interim Approach" (PDF) (4pp, 29K About PDF

General Information

EPA's Audit Policy

Interim Approach

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Purpose of EPA's Audit Policy and the Interim Approach

EPA's Audit Policy encourages regulated entities to voluntarily discover, disclose, correct and prevent violations of Federal environmental requirements. The Interim Approach describes how EPA will apply the Audit Policy to new owners of regulated facilities. It is designed to motivate new owners to audit newly acquired facilities and to encourage self-disclosures of violations that will, once corrected, yield significant pollutant reductions and benefits to the environment.

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Incentives Available Under the Audit Policy

Penalty mitigation - Entities that meet all of the conditions contained in the Audit Policy are eligible for 100% mitigation of all gravity-based penalties. Entities that meet all of the conditions except for "systematic discovery" of violations are eligible for 75% penalty mitigation. EPA retains its discretion to collect any economic benefit that may have been realized as a result of noncompliance.

No recommendation for criminal prosecution - For entities that disclose violations of criminal law and meet all applicable conditions under the Policy, in most cases (see Audit Policy for exceptions) the Agency will refrain from recommending criminal prosecution for the disclosing entity.

No routine requests for audit reports - In general, EPA will not request audit reports from those who disclose under the Audit Policy.

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Tailored Incentives for New Owners Available Under the Interim Approach

Who is a "new owner"?

An eligible new owner must certify that:

  1. Prior to the transaction, it was not responsible for environmental compliance at the facility which is the subject of the disclosure, did not cause the violations being disclosed and could not have prevented their occurrence;
  2. The violation which is the subject of the disclosure originated with the prior owner; and
  3. Prior to the transaction, neither the buyer nor the seller had the largest ownership share of the other entity, and they did not have a common corporate parent.

Tailored incentives for new owners

include penalty mitigation beyond what the Audit Policy offers and an expanded range of violations that may be eligible for Audit Policy consideration.

Penalty mitigation -

Applies to new owners that, within 9 months of the transaction closing: promptly disclose violations to EPA, or enter into an audit agreement with EPA, and meet all the conditions of the Audit Policy, as modified for new owners:

  1. No penalties will be assessed against the new owner for the period before the date of acquisition;
  2. Penalties for economic benefit associated with avoided operation and maintenance costs will be assessed against the new owner, but only from the date of acquisition; and
  3. No penalties for economic benefit associated with delayed capital expenditures or with unfair competitive advantage will be assessed against the new owner if the violations are corrected in accordance with the Audit Policy (i.e., within 60 days of discovery or another reasonable timeframe to which EPA has agreed).

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To Make a Disclosure under the Audit Policy

Disclosures of civil violations should be made to the EPA Region in which the entity or facility is located or, where multiple Regions are involved, to EPA Headquarters. For more information, contact Philip Milton (202-564-5029) or Caroline Makepeace (202-564-6012).

Disclosures of criminal violations should be made to the appropriate EPA criminal investigation division, to EPA Headquarters, or to the U.S. Department of Justice. For more information, contact James Morgan (202-564-7684).

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Conditions of the Audit Policy

Entities that satisfy the following conditions are eligible for Audit Policy benefits. (Note: entities that fail to meet the first condition - systematic discovery - are eligible for 75% penalty mitigation and in most cases (see Audit Policy) no recommendation for criminal prosecution).

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Modification to Audit Policy Conditions for New Owners

For new owners, modifications to the following 5 of 9 conditions of the Audit Policy will make disclosures of additional categories of violations eligible for Audit Policy penalty mitigation:

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