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AUDIT AGREEMENTS

What is an audit agreement?

An 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.

What are the benefits of audit agreements?

Audit agreements are effective mechanisms for resolving a broad range and number of corporate-wide violations discovered during environmental audits. These agreements are an optimal compliance tool for companies with facilities located in more than one EPA Region to ensure that the disclosures are processed on the same schedule and with one point of contact in the Agency. These agreements allow companies to plan a corporate-wide audit with an advanced understanding between the company and EPA regarding schedules for conducting the audit and disclosing violations beyond the current 21-day disclosure requirement for single-facility disclosures.

For many, this approach provides the opportunity to evaluate corporate practices and environmental compliance without the stigma of an enforcement action, and removes the uncertainty and cost of litigation, attorneys’ fees and sanctions for violations. An agreement provides companies with assurance that violations disclosed over an extended schedule will meet EPA’s expectations for timely disclosure. This approach also can provide an opportunity for companies to design and implement practices that incorporate environmental compliance into corporate operations. For EPA, corporate auditing agreements provide an efficient and economical means of improving and ensuring environmental compliance.

How is an audit agreement different from an Audit Policy disclosure?

While there are a few differences between audit agreements and Audit Policy disclosures, the key difference is that an audit agreement has the added benefit of an extended schedule for disclosure of violations. Routine disclosures made under the Audit Policy, however, must be submitted to EPA in writing within 21 days of discovery in order to be eligible for consideration of penalty mitigation.

How do I develop a corporate audit agreement?

Information on contacting other EPA Regional offices
Companies in Region 2 interested in developing an audit agreement should contact Diane Fiorito at (212) 637-4047.  In the case of multi-Regional facilities, contact EPA Headquarters. For companies unsure whether an auditing agreement best suits their needs, they may, for a limited time, engage in an anonymous dialogue for the purpose of exploring potential terms of an agreement.

Corporate auditing agreements are designed to address potentially high-volume disclosures. The audits addressed in an agreement can range from ones that address a specific regulatory requirement to those that involve a comprehensive multi-media review. EPA will require that an auditing agreement be in writing and that the facilities to be audited be identified. Based on the breadth and complexity of the audit, EPA and the company can reach mutually acceptable terms regarding schedules for audit commencement and completion, and a final disclosure report.

All agreements are expected to have a schedule for violation corrections and to define injunctive relief. The company and EPA can also define in advance economic benefit for certain violation types (where applicable) and violations ineligible for relief. Such definitions provide the and the parameters of a corporate auditing agreement, EPA strives to treat competitors similarly. In developing an auditing agreement, EPA will coordinate with EPA Regions to ensure that the proposed facilities are not ineligible for the Audit Policy due to an ongoing enforcement action or any inspection that might occur during the audit period. In all cases, however, companies that are subject of a corporate-wide investigation by EPA are ineligible for Audit Policy relief. EPA will coordinate an expedited and comprehensive resolution of all disclosures. For violations involving a state-approved program, EPA will notify the state of the disclosure.

EPA understands that, as with most enforcement actions, confidentiality is important to companies. EPA will protect settlement discussions associated with the audit, and findings conducted and disclosed under an agreement, consistent with EPA’s handling of enforcement matters and EPA’s "Confidentiality and Information Received Under Agency’s Self-Disclosure Policy" (1997). Typically, disclosures and related documents are withheld from public release until such time as the Agency and the self-discloser have formally settled the case.

Can you provide an example of an audit agreement?

Since 2000, EPA Region 2 has negotiated 72 corporate-wide audit agreements covering 22 colleges and universities, 42 healthcare facilities, 7 fleet maintenance facilities and 1 local government facility. To help streamline the process, a sample audit agreement was developed which can be obtained by contacting Diane Fiorito. She can be reached via e-mail at fiorito.diane@epa.gov or via phone at 212-637-4047.

 


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