United States Office of Enforcement and EPA 300-N-99-020 

Environmental Protection Agency Compliance Assurance (2248A) 

AUDIT POLICY UPDATE


Volume 4, Number 2 *Special Issue* Office of Regulatory Enforcement September 2000 (Revised)


Corporate-Wide Audit Agreements: 

An Effective Approach for Companies to Improve 

Environmental Compliance 

The U.S. Environmental 

Protection Agency (EPA) 

encourages companies with 

Recently, EPA and a major 

manufacturer entered into a voluntary 

agreement under which the 

for the audit, disclosures and 

compliance, and provides for a 

nationwide settlement at the audit’s 

multiple facilities to take advantage of manufacturer will audit, disclose and conclusion. 

the Agency’s Audit Policy (Incentives correct any violation of Clean Air Act This is a landmark agreement 

for Self-Policing: Discovery, New Source Review (NSR) standards because of the amount of resources 

Disclosure, Correction and Prevention at 40 facilities. committed to conduct the audit and 

of Violations, 60 Fed. Reg. 66706 (Dec. 

22, 1995)) to conduct corporate-wide This agreement potentially involves 

the correction of Clean Air Act 

correct violations, and the potential 

environmental benefits that will result 

audits and develop corporate-wide 

compliance systems. The Audit Policy 

eliminates gravity-based 

penalties for companies 

applicability determinations made years 

ago by a previous owner. Without this 

from correction of any violations. 

The audit agreement allows for the 

efficiencies of analyzing 

similar processes and that voluntarily discover, U.S. EPA and a major manufacturer recently entered into a resolving all violations at promptly disclose and one time, in addition to expeditiously correct voluntary agreement under which the manufacturer will the benefits gained from violations of federal

environmental law. audit, disclose and correct any violation of Clean Air Act EPA and the company

working together to 

During the past 18 New Source Review (NSR) standards at 40 facilities. bring 40 facilities into 

months, EPA has 

negotiated corporatewide agreements with companies to 

audit and correct violations of federal 

PCB requirements at natural gas 

facilities, emergency notification and 

spill prevention requirements at 17 

telecommunication companies, Clean 

Air Act federal fuel standards at a major 

airline, and Toxic Substances Control 

Act (TSCA) violations at two major 

chemical companies. 

See Page 2 for 

information on how to 

develop an auditing 

agreement with EPA. 

agreement, such errors in applicability 

determinations would potentially expose 

the new owner to the extensive and 

unpredictable costs associated with an 

enforcement action. The agreement 

establishes a three-year commitment by 

the company to audit its facilities at a 

cost of more than $2,000,000, and 

highlights the value of corporate-wide 

agreements in the context of 

acquisitions. 

The audit itself involves a detailed 

review and analysis of whether any 

changes at the facilities triggered NSR 

requirements, including BACT/LAER 

and air quality impact analysis/offsets. 

The agreement establishes a schedule 

compliance. 

Benefits of Corporate 

Auditing Agreements 

Corporate auditing agreements are 

proving to be effective mechanisms to 

resolve 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 

Continued Page 2 

This newsletter can be found on the Internet at http://www.epa.gov/oeca/ore/auditupd.html 
SPECIAL ISSUE AUDIT POLICY UPDATE SPECIAL ISSUE 

From Page 1 

understanding between the company 

and EPA regarding schedules for 

conducting the audit and disclosing 

violations beyond the current 10-day 

disclosure requirement for singlefacility disclosures. 

For companies, 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 to Develop a 

Corporate Audit 

Agreement 

Companies interested in conducting 

an auditing agreement should contact 

their EPA Regional office for the area 

in which the facilities are located or, in 

the case of multi-Regional facilities, 

contact Leslie Jones at EPA’s Office 

of Regulatory Enforcement, at 

(202) 564-5123 or Email: 

jones.leslie@epa.gov. For companies 

Corporate audit 

agreements: EPA and the 

company can reach mutually 

acceptable terms regarding 

schedules for audit 

commencement and 

completion, and a final 

disclosure report. 

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 highvolume 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 

company with advanced knowledge of 

potential statutory penalties for specific 

violation types. In developing schedules 

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 SelfDisclosure Policy” (1997). Typically, 

disclosures and related documents are 

withheld from public release until such 

time as the Agency and the selfdiscloser have formally settled the case. 

See page 3 for a list of Audit Policy 

information documents found on 

EPA’s Website. 

The Audit Policy Update is published periodically for the Assistant Administrator for Enforcement and Compliance 

Assurance by the Office of Regulatory Enforcement. The newsletter is intended to provide information to the public and 

regulated communities regarding developments under the EPA Audit Policy. Editor: Virginia Bueno, (202) 564-8684. Email: 

bueno.virginia@epa.gov. 

subscription requests 

encouraged. 

AUDIT POLICY UPDATE 

Co-Editor: Leslie A. Jones, (202), 564-5123; Email: jones.leslie@epa.gov. Change of address or 

should be sent to the editor. Reproduction and wide dissemination of the newsletter is highly 

SEPTEMBER 2000 Page 2 
SPECIAL ISSUE AUDIT POLICY UPDATE SPECIAL ISSUE 

Audit Policy Internet Resources 

@ Audit Policy Support Documents 

http://www.epa.gov/oeca/ore/apolguid.html 

@ Audit Policy: Incentives for Self-Policing 

http://www.epa.gov/oeca/auditpol.html 

@ Audit Policy Interpretive Guidance (Questions and Answers) 

http://www.epa.gov/oeca/audpolguid.pdf 

@ ‘Audit Policy Update’ (Newsletter) 

http://www.epa.gov/oeca/ore/auditupd.html 

@ Confidentiality of Information Received Under Agency's Self-Disclosure 

Policy 

http://www.epa.gov/oeca/sahmemo.html 

@ Memorandum--Subject: Implementation of the Environmental Protection 

Agency's Self-Policing Policy for Disclosures Involving Potential Criminal 

Violations 

http://www.epa.gov/oeca/oceft/audpol2.html 

@ Policy on Compliance Incentives For Small Businesses 

http://www.epa.gov/oeca/smbusi.html 

@ Memorandum--Subject: Reduced Penalties for Disclosures of Certain 

Clean Air Act Violations 

http://www.epa.gov/oeca/ore/caa-tit.pdf 

@ Optional Form for Disclosure Submittal 

http://www.epa.gov/oeca/ore/checklist.pdf 

@ Audit Policy Evaluation 

http://www.epa.gov/oeca/oppa/ape.htm 

@ ‘Enforcement Alert’ (Newsletter) 

http://www.epa.gov/oeca/ore/enfalert 

SEPTEMBER 2000 Page 3 
United States

Environmental Protection Agency

Office of Regulatory Enforcement

(2248A)

Washington, D.C. 20460

Official Business

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Audit Policy Update