GAO

United States General Accounting Office

Report to the Chairman, Subcommittee 

on Oversight of Government 

Management, Restructuring, and the 

District of Columbia, Committee on 

Governmental Affairs, U.S. Senate

February 2001 REGULATORY 

REFORM

Implementation of 

Selected Agencies’ 

Civil Penalty Relief 

Policies for Small 

Entities

GAO-01-280

Page 1 GAO-01-280 Civil Penalty Relief Policies

Contents

Letter 3

Results in Brief 4

Background 6

Objectives, Scope, and Methodology 9

Selected Agencies’ Section 223 Penalty Relief Policies Varied 11

Most Agencies Were Not Able to Provide Enforcement Data in

the Format Requested 21

Most Agencies Could Not Identify Paperwork-Related Enforcement

Actions Against Small Entities 27

Conclusions 29

Matters for Congressional Consideration 30

Agency Comments and Our Evaluation 31

Appendix I: Comments From the Environmental Protection

Agency 36

Tables Table 1: Agencies’ Section 223 Policies Vary in Use of Conditions

and Exclusions Suggested in SBREFA 20

Table 2: MSHA Enforcement Actions and Related Penalty Relief for 

Small Entities—Fiscal Years 1997 Through 2000 25

Table 3: OSHA Inspections and Related Penalty Relief for Small 

Entities—Fiscal Years 1997 Through 2000 25

Table 4: Percent of MSHA Enforcement Actions Involving Small

Entities Without Penalty Relief That Involved Paperwork 

Requirements—Fiscal Years 1997 Through 2000 28

Abbreviations

DOJ Department of Justice

DOL Department of Labor

EPA Environmental Protection Agency

FCC Federal Communications Commission

INS Immigration and Naturalization Service

MSHA Mine Safety and Health Administration

OMB Office of Management and Budget

OSHA Occupational Safety and Health Administration

RFA Regulatory Flexibility Act

SBREFA Small Business Regulatory Enforcement Fairness Act
Page 2 GAO-01-280 Civil Penalty Relief Policies
Page 3 GAO-01-280 Civil Penalty Relief Policies

United States General Accounting Office

Washington, D.C. 20548

Letr

February 20, 2001

The Honorable George V. Voinovich

Chairman, Subcommittee on Oversight of Government

Management, Restructuring, and the District of Columbia

Committee on Governmental Affairs

United States Senate

Dear Mr. Chairman:

One of the ways that federal regulatory agencies enforce applicable 

statutes and regulations is through the imposition of civil monetary 

penalties for violations of those statutes and regulations. The amounts of 

the penalties imposed can vary substantially, depending on the limits 

specified in the applicable statutes or regulations and the degree to which 

the agencies impose the maximum fines permitted. In 1996, Congress 

passed the Small Business Regulatory Enforcement Fairness Act 

(SBREFA) (5 U.S.C. 601 note), which was intended to, among other things, 

“create a more cooperative regulatory environment among agencies and 

small businesses that is less punitive and more solution-oriented.” Section 

223 of SBREFA, entitled “Rights of Small Entities in Enforcement Actions,” 

requires agencies to provide small entities (a small business, a small 

government, or a small organization) with some form of relief from civil 

monetary penalties. Specifically, subsection 223(a) of SBREFA required 

federal agencies regulating the activities of small entities to establish a 

policy or program by March 29, 1997, for the reduction and, under 

appropriate circumstances, the waiver of civil penalties by small entities. 

Subsection 223(c) of the act required agencies to submit a one-time report 

to four congressional committees by March 29, 1998, on the scope of their 

programs or policies, the number of enforcement actions against small 

entities that qualified or failed to qualify for the SBREFA program or policy, 

and the total amount of penalty reductions and waivers.1

You asked us to examine the implementation of section 223 of SBREFA and 

issues related to civil penalty enforcement in selected agencies. 

1

The four committees to which agencies were required to submit reports are the Senate 

Committee on Governmental Affairs, the House Committee on the Judiciary, and the House 

and Senate Committees on Small Business. 
Page 4 GAO-01-280 Civil Penalty Relief Policies

Specifically, you asked us to (1) describe the similarities and differences in 

the selected agencies’ policies or programs under subsection 223(a) of the 

act; (2) determine how many civil penalty enforcement actions each 

selected agency had initiated against small entities in each fiscal year since 

SBREFA’s enactment, and how many of those actions resulted in some kind 

of penalty relief (either a waiver or penalty reduction); and (3) determine 

whether any of the civil penalty enforcement actions that did not result in 

penalty relief involved paperwork requirements and, if so, why a waiver or 

penalty reduction was not provided in those cases. We focused our review 

on five federal agencies that have civil monetary penalty authority, 

appeared to have developed a large number of rules affecting small entities, 

and were of interest to the Subcommittee: the Environmental Protection 

Agency (EPA), the Federal Communications Commission (FCC), the 

Immigration and Naturalization Service (INS) within the Department of 

Justice (DOJ), and the Occupational Safety and Health Administration 

(OSHA) and the Mine Safety and Health Administration (MSHA) within the 

Department of Labor (DOL). 

Results in Brief The five agencies identified eight penalty reduction and waiver policies as 

implementing section 223(a) of SBREFA. All of the agencies’ policies are 

within the discretion afforded by SBREFA, but the agencies’ policies vary 

substantially between, and sometimes within, the agencies. Some of their 

policies are specifically directed at small entities or give small entities 

special consideration, but others treat small entities the same way they 

treat large entities. Some of the policies apply to all of the agencies’ 

enforcement actions involving small entities, but others cover only a 

portion of those actions. For example, two of EPA’s section 223 policies 

apply only to violations that are voluntarily disclosed by a small entity, but 

do not apply to other agency enforcement actions (which also may result in 

penalty relief). The agencies’ policies also differ regarding how key terms 

such as “small entity” and “penalty reduction” are defined, how the policies’ 

penalty relief provisions are triggered, and their conditions for and 

exclusions from penalty relief. The agencies indicated that none of their 

policies were developed because of SBREFA, and that most of the policies 

were established before the act took effect. All but two of the policies have 

been published in the Federal Register and/or the Code of Federal 

Regulations.

MSHA was the only one of the five agencies that provided all of the data 

required by subsection 223(c) of SBREFA in the agencies’ 1998 reports to 

congressional committees. MSHA was also the only agency that was able to 
Page 5 GAO-01-280 Civil Penalty Relief Policies

provide us with data for each year since the enactment of SBREFA on the 

number of enforcement actions against small entities, the number that 

resulted in penalty relief, and the dollar value of the relief provided. 

(SBREFA does not currently require agencies to maintain this information.) 

The other agencies either (1) provided data on the number of inspections of 

small entities’ facilities or the number of small entities that were involved 

in their section 223 programs (both of which may be different from the 

number of enforcement actions involving small entities); (2) said they 

could only provide data on the number of enforcement actions initiated 

against entities of any size, not just small entities; or (3) provided data that 

were inconsistent and incomplete. 

Because MSHA was the only agency that identified the number of 

enforcement actions against small entities that did not result in penalty 

relief, it was also the only agency that identified the number of such actions 

that involved paperwork requirements. (SBREFA does not currently 

require agencies to maintain this information.) MSHA indicated that, in 

each fiscal year since the enactment of SBREFA, less than 9 percent of its 

enforcement actions without penalty relief involved paperwork 

requirements. MSHA officials said that most of these actions imposed 

single $55 fines that were required by regulation or involved more serious 

violations that could have an impact on the health and safety of employees. 

OSHA indicated that all of its inspections involving small entities resulted 

in some form of penalty relief under the agency’s section 223 policy. FCC 

and INS officials said they could not provide data on enforcement actions 

involving small entities because their agencies do not provide special civil 

penalty relief based on the size of the regulated entity. EPA officials said 

the agency’s data systems do not distinguish between violations involving 

paperwork requirements and nonpaperwork requirements. 

If Congress wants to strengthen civil penalty relief for small entities, it 

should consider amending section 223 of SBREFA to require that agencies’ 

policies or programs (1) provide small entities with more penalty relief 

than other similarly situated entities and (2) cover all of the agencies’ civil 

penalty enforcement actions involving small entities. Also, to facilitate 

congressional oversight in this area, Congress should consider amending 

the act to require agencies to maintain data by fiscal year or some other 

time period on such factors as the number of enforcement actions 

involving all small entities, the number of enforcement actions that 

resulted in penalty reductions, and the amount of penalty relief provided. 

Any such data should clearly indicate how the agencies defined key terms 

such as “small entity” and “penalty reduction.”
Page 6 GAO-01-280 Civil Penalty Relief Policies

Background Small businesses are a significant part of the nation’s economy, accounting 

(under SBA’s definition) for 99 percent of all businesses, about 50 percent 

of the gross domestic product, and about 53 percent of private industry’s 

workforce. Small governments make up 97 percent of all of the local 

governments in the United States. However, small businesses and 

governments can be disproportionately affected by federal agencies’ 

regulatory requirements, and agencies may inadequately consider the 

impact of those requirements on small entities when the requirements are 

implemented.2

In response to concerns about the effect that federal regulations may have 

on small entities, Congress passed the Regulatory Flexibility Act (RFA) in 

1980 (5 U.S.C. 601-612). The RFA requires federal agencies to analyze the 

anticipated effects of rules they plan to propose on small entities unless 

they certify that the rules will not have a “significant economic impact on a 

substantial number of small entities.” We have reported several times on 

the implementation of the RFA, noting areas in need of improvement.3

On March 29, 1996, Congress passed SBREFA to, among other things, 

strengthen the RFA’s protections for small entities and “create a more 

cooperative regulatory environment among agencies and small businesses 

that is less punitive and more solution-oriented.” Subsection 223(a) of 

SBREFA directed each federal agency regulating the activities of small 

entities to establish a policy or program by March 29, 1997, “to provide for 

the reduction, and under appropriate circumstances for the waiver, of civil 

penalties for violations of a statutory or regulatory requirement by a small 

entity.” Subsection 223(b) identifies certain “conditions and exclusions” 

that agencies’ policies or program could include (e.g., requiring the small 

entity to correct the violation within a reasonable period of time and 

excluding violations that pose serious health, safety, or environmental 

threats). Although the agencies’ policies and programs were required to 

contain conditions and exclusions (subject to the requirements or 

limitations in other statutes), agencies were not required to include the 

2

Thomas D. Hopkins, A Survey of Regulatory Burdens, June 1995 report to the Small 

Business Administration; and Senate Report on the Unfunded Mandate Reform Act of 1995, 

Report 104-1, January 11, 1995, Committee on Governmental Affairs.

3

See, for example, Regulatory Flexibility Act: Inherent Weaknesses May Limit Its Usefulness 

for Small Governments (GAO/HRD-91-61, Jan. 11, 1991); Regulatory Flexibility Act: Status 

of Agencies’ Compliance (GAO/GGD-94-105, Apr. 27, 1994); and Regulatory Flexibility Act: 

Agencies’ Interpretations of Review Requirements Vary (GAO/GGD-99-55, Apr. 2, 1999). 
Page 7 GAO-01-280 Civil Penalty Relief Policies

conditions and exclusions listed in the subsection and were not limited to 

those listed. Subsection 223(c) required agencies to submit a one-time 

report to four specific congressional committees by March 29, 1998, on (1) 

the scope of their programs or policies, (2) the number of enforcement 

actions against small entities that qualified or failed to qualify for the 

programs or policies, and (3) the total amount of penalty reductions and 

waivers. 

Comments by the drafters of SBREFA at the time the act was passed 

underscore the discretion that agencies have in the development and 

implementation of their section 223 programs and the degree to which 

agencies can use existing programs to satisfy the act’s requirements. Their 

statement, entitled the “Joint Managers Statement of Legislative History 

and Congressional Intent,” says that “[e]ach agency would have the 

discretion to condition and limit the policy or program on appropriate 

conditions,” and “it is up to each agency to develop the boundaries of their 

program and the specific circumstances for providing for a waiver or 

reduction of penalties.”4

 The statement also noted that “[s]ome agencies 

have already established formal or informal policies or programs that 

would meet the requirements of this section” and specifically referred to 

EPA’s small business enforcement policy in this regard. 

The enactment of SBREFA marked the second time in less than a year that 

agencies had been encouraged to provide penalty relief to small 

businesses. In April 1995, President Clinton, by memorandum, directed the 

heads of 27 departments and agencies to modify the penalties for small 

businesses in certain situations “to the extent permitted by law.”5

 For 

example, the memorandum said agencies “shall exercise their enforcement 

discretion to waive the imposition of all or a portion of a penalty when the 

violation is corrected within a time period appropriate to the violation in 

question.” The memorandum also required each agency to submit a plan to 

the Director of the Office of Management and Budget (OMB) describing the 

actions the agency would take and said the plan must provide that the 

agency will implement the policies on or before July 14, 1995. It also said 

that the plans should identify how notification of the agencies’ policies will 

be given to frontline workers and small businesses. 

4

Cong. Rec. S3243 (daily ed., Mar. 29, 1996). 

5

The memorandum was directed to the heads of all of the agencies in this study with the 

exception of FCC, which is an independent regulatory agency. 
Page 8 GAO-01-280 Civil Penalty Relief Policies

We have recognized in previous reports that enforcement is an important 

element of regulatory management and civil penalties are important to 

agencies’ enforcement efforts. For example, in a 1996 report on the Clean 

Water Act we said “penalties play a key role in environmental enforcement 

by deterring violators and by ensuring that regulated entities are treated 

fairly and consistently so that no one gains a competitive advantage by 

violating environmental regulations.”6

 In another report, we said civil 

monetary penalties “are potentially a strong deterrent” to noncompliance 

with nursing home regulations, and we also said those penalties “have 

potential to provide the necessary incentives to ensure continued 

compliance.”7

However, some Members of Congress have become concerned about the 

impact that civil penalties can have on small businesses and other small 

entities, particularly for infractions that may be relatively minor in nature. 

During the 105th Congress, the House of Representatives approved 

legislation that would have required federal regulatory agencies, in certain 

circumstances, to suspend civil fines on small businesses for first-time 

paperwork violations so that the small businesses could correct the 

violations.8

 Similar legislation was introduced in the Senate but was not 

enacted.9 In commenting on this proposed legislation, EPA and other 

agencies indicated that information collection requirements are the 

foundation of many health and safety statutes, and that violations of those 

requirements should not automatically be treated as a minor infractions 

meriting a waiver of civil penalties. In testimony before the Senate 

Committee on Governmental Affairs, the Administrator of the Office of 

Information and Regulatory Affairs within OMB said the Clinton 

administration strongly opposed the Senate bill, noting that “[w]e already 

have a powerful tool designed to give protection to small business 

owners”—section 223 of SBREFA. The Administrator said that OMB was 

not aware of any significant problems with the implementation of section 

223. However, he also said that if there are “gaps” in section 223 that need 

correction, OMB would be willing to help craft an appropriate amendment.

6

Water Pollution: Many Violations Have Not Received Appropriate Enforcement Attention

(GAO/RCED-96-23, Mar. 20, 1996).

7

Nursing Homes: Additional Steps Needed to Strengthen Enforcement of Federal Quality 

Standards (GAO/HEHS-99-46, Mar. 18, 1999).

8

H.R. 3310, the “Small Business Paperwork Reduction Act Amendments of 1998.”

9

S. 1378, the “Small Business Paperwork Reduction Act Amendments of 1999.”
Page 9 GAO-01-280 Civil Penalty Relief Policies

Objectives, Scope, and 

Methodology

The objectives of our review were to (1) describe the similarities and 

differences in the selected agencies’ policies or programs under subsection 

223(a) of SBREFA; (2) determine how many civil penalty enforcement 

actions each selected agency had initiated against small entities each fiscal 

year since SBREFA’s enactment and how many of those actions resulted in 

some kind of penalty relief (either a waiver or penalty reduction); and (3) 

determine whether any of the civil penalty enforcement actions that did not 

result in penalty relief involved paperwork requirements and, if so, why a 

waiver or penalty reduction was not provided in those cases. 

To identify the agencies included in our review, we examined the October 

editions of the Unified Agenda of Federal Regulatory and Deregulatory 

Actions for fiscal years 1997, 1998, and 1999 to identify the agencies that 

most frequently appeared to issue rules with a significant economic impact 

on a substantial number of small entities.10 Ten departments and agencies 

had at least 50 entries in at least 1 of these editions of the Unified Agenda—

EPA; FCC; and the Departments of Agriculture, Commerce, Health and 

Human Services, the Interior, Justice, Labor, Transportation, and the 

Treasury. On the basis of the Subcommittee’s interests, we selected EPA, 

FCC, DOJ, and DOL for inclusion in the review. Within DOJ and DOL, we 

identified the agencies that accounted for most of the departments’ totals—

INS within DOJ and MSHA and OSHA within DOL. We then confirmed that 

each of the five agencies selected had civil penalty authority. 

To address the first objective of describing the similarities and differences 

in the selected agencies’ policies, we obtained a copy of the report that 

each of the agencies submitted in 1998 pursuant to subsection 223(c) of 

SBREFA from the Senate Committee on Small Business. We also obtained 

copies of each agency’s policies and reports from the agencies or through 

the Internet. We reviewed the agencies’ policies and policy descriptions in 

their reports, noting areas of similarity and difference (e.g., whether the 

agencies’ policies provided civil penalty relief for small entities and the 

scope of the policies’ coverage). We then clarified, where appropriate, our 

characterizations of the agencies’ policies with agency officials. 

10The Unified Agenda is published twice each year in the Federal Register by the Regulatory 

Information Service Center and provides uniform reporting of data on regulatory activities 

under development throughout the federal government.
Page 10 GAO-01-280 Civil Penalty Relief Policies

We also attempted to use the agencies’ subsection 223(c) reports to address 

the second objective—determining how many civil penalty enforcement 

actions the agencies had initiated and how many resulted in penalty relief. 

However, two of the reports did not contain any enforcement data, and in 

two other cases the data were not presented in the manner specified in the 

statute or consistent with our objective. Therefore, we asked officials in 

each selected agency to identify how many civil penalty enforcement 

actions the agency had initiated against small entities each fiscal year since 

SBREFA’s enactment (i.e., fiscal years 1997, 1998, 1999, and 2000), and how 

many of those actions in each year resulted in some penalty relief and no 

penalty relief. 

To address our third objective regarding paperwork requirements, we 

asked the agencies to identify how many of the enforcement actions 

against small entities that resulted in no penalty relief involved a 

paperwork requirement. We also asked the agencies to explain why those 

paperwork-related actions did not result in civil penalty relief. We defined a 

“paperwork requirement” as involving a collection of information approved 

by OMB pursuant to the Paperwork Reduction Act of 1995. 

This review focused on five selected agencies and cannot be used to 

characterize the SBREFA programs or policies in other agencies. However, 

we believe these agencies’ programs and policies illustrate the variation in 

such policies among agencies with a significant regulatory impact on small 

entities. We did not validate the reliability of the enforcement data that 

agencies provided. We conducted our review between August 2000 and 

December 2000 in accordance with generally accepted government 

auditing standards.

We provided a draft of this report to the Secretary of Labor, the Attorney 

General, the Chairman of the Federal Communications Commission, and 

the Administrator of the Environmental Protection Agency for their review 

and comment. DOJ, DOL, and FCC officials had no substantive comments 

on the report. The EPA comments that we received are discussed in the 

“Agency Comments and Our Evaluation” section at the end of this letter, 

and are reproduced in appendix I. 
Page 11 GAO-01-280 Civil Penalty Relief Policies

Selected Agencies’ 

Section 223 Penalty 

Relief Policies Varied

The five agencies’ section 223 policies vary substantially among, and 

sometimes within, the agencies in terms of (1) whether they apply to all 

penalty-related enforcement actions involving small entities, (2) whether 

they provide entities with more penalty relief than similarly situated larger 

entities, (3) how key terms such as small entity and penalty reduction are 

defined, and (4) their conditions for and exclusions from penalty relief. 

Agency officials said that none of the agencies’ policies were developed 

because of SBREFA, and most of the policies had been established before 

the act took effect. 

Agencies’ Policies Were Not 

Adopted in Response to 

SBREFA

The five selected agencies identified eight penalty reduction and waiver 

policies as implementing subsection 223(a) of SBREFA. According to the 

agencies’ 1998 reports and our interviews with agency officials, none of the 

eight policies were adopted as a result of SBREFA’s enactment, and most of 

the policies had been established before the act took effect. As previously 

noted, the drafters of SBREFA recognized that agencies could use existing 

programs to satisfy the act’s requirements. Some agencies took steps after 

SBREFA was enacted to publicize and market their existing programs to 

small entities. 

• EPA said in its 1998 report that the agency had “historically addressed 

the special circumstances of many small entities when assessing 

penalties in enforcement actions.” EPA also said that its program to 

reduce or waive penalties for small entities consisted of three separate 

policies, each of which had been initiated before the enactment of 

SBREFA.

• EPA issued its Final Policy on Compliance Incentives for Small 

Businesses (small business policy) on May 20, 1996.11 The policy 

provides penalty waivers to entities with 100 or fewer employees as 

incentives to voluntarily disclose violations and to participate in 

compliance assistance.

• EPA’s policy on Incentives for Self Policing: Discovery, Disclosure, 

Correction, and Prevention of Violations (audit policy), was initially 

published in the Federal Register on December 22, 1995, and was 

11An interim version of EPA’s small business policy was issued on June 13, 1995, and the final 

version was published in the Federal Register on April 11, 2000 (65 Fed. Reg. 19630).
Page 12 GAO-01-280 Civil Penalty Relief Policies

revised and republished as the final policy on April 11, 2000.12 The 

policy provides for reductions and waivers of penalties for entities of 

all sizes that promptly disclose violations in writing and correct those 

violations.

• EPA’s Policy on Flexible State Enforcement Responses to Small 

Community Violations (small community policy), was issued in 

November 1995. Under this policy, states may provide small 

communities with an incentive to request compliance assistance by 

waiving or reducing the penalty if certain criteria are met. This policy 

has not been published in the Federal Register, but EPA officials said 

it was distributed directly to state and local government 

stakeholders. 

As we discuss more fully later in this report, these three policies do not 

cover all EPA enforcement actions involving small entities, and do not 

include all civil penalty relief that small entities can receive from EPA. 

• FCC said that its existing civil penalty (“forfeiture”) policies met the 

subsection 223(a) requirement. FCC officials said the policy was first 

published in the Federal Register on August 14, 1997, and became 

effective on October 14, 1997, replacing a 1991 general policy 

statement.13 The Commission noted that many of the factors delineated 

in SBREFA as potentially relevant considerations in decisions regarding 

penalty relief were already contained in the Communications Act of 

1934, as amended, and were codified in its rule on forfeiture 

proceedings.14

• INS said in its 1998 report that it had “long-established policies” to 

provide for the reduction or waiver of civil penalties for small entities. 

INS officials told us during this review that the agency’s civil penalty 

authority regarding small entities primarily related to the following two 

areas of regulatory activity: (1) employment verification under section 

274A of the Immigration and Nationality Act (INA), as amended by the 

Immigration Reform and Control Act of 1986; and (2) oversight of air 

and sea carriers who bring aliens into the United States under section 

273 of the act, as amended. 

12See 60 Fed. Reg. 66706 and 65 Fed. Reg. 19618. The revisions to this policy took effect on 

May 11, 2000.

13See 62 Fed. Reg. 43474 (1997).

14See 47 C.F.R. § 1.80. 
Page 13 GAO-01-280 Civil Penalty Relief Policies

• In the employer verification area, INS pointed to its “Guidelines for 

Determination of Employer Sanctions Civil Money Penalties,” which 

were issued in August 1991, as satisfying subsection 223(a) of 

SBREFA. INS said that the guidelines had been continually updated 

since their issuance and are part of the INS Field Manual. A less 

specific version of the INS civil monetary penalty policy was 

published in the Federal Register in 1987 and was codified in the 

Code of Federal Regulations.15 INS also noted in the 1998 report that 

it published a proposed rule on April 7, 1998, seeking to amend the 

agency’s regulations implementing section 411 of the Illegal 

Immigration Reform and Immigrant Responsibility Act of 1996.16 INS 

said this statutory provision was aimed at allowing employers of any 

size who have made a good faith attempt to comply with a particular 

employment verification requirement to correct technical or 

procedural failures before they are deemed to be violations of the 

act. At the time of our review, this proposed rule had not been issued 

in final form.

• Regarding carriers, INS pointed to a June 10, 1996, proposed rule on 

“Screening Requirements of Carriers for Reduction, Refund, or 

Waiver of Fines” as satisfying subsection 223(a) of SBREFA.17 INS 

published the final rule on April 30, 1998.18

• MSHA said that an existing general civil monetary penalty relief policy 

satisfied the SBREFA subsection 223(a) requirement. The policy was 

published in the Federal Register on May 21, 1982.19 In August 1999, 

MSHA supplemented the policy with a policy letter that “provides 

clarification of the statutory and regulatory provisions governing the 

assessment of civil penalties” under the Federal Mine Safety and Health 

Amendments Act of 1977. 

• OSHA said that an existing policy for granting civil monetary penalty 

relief met the SBREFA subsection 223(a) requirement. OSHA officials 

said the policy dates back to the Occupational Safety and Health Act of 

1970 and was most recently published as a March 1998 instruction 

15The policy was originally published at 52 Fed. Reg. 16221 (1987) and was codified at 8 

C.F.R. § 274a.6. 

16See 63 Fed. Reg. 16909 (1998).

17See 61 Fed. Reg. 29323 (1996). 

18See 63 Fed. Reg. 23643 (1998).

19See 47 Fed. Reg. 22294 (1982). The policy was codified at 30 C.F.R. Part 100.
Page 14 GAO-01-280 Civil Penalty Relief Policies

directive entitled “Providing Assistance to Smaller Employers.” The 

directive summarizes OSHA’s detailed penalty relief procedures in its 

September 1994 “Field Inspection Reference Manual.” OSHA’s policy has 

not been published in the Federal Register. 

With the exception of EPA’s small community policy statement and OSHA’s 

instruction directive, all of the agencies’ civil penalty relief policies have 

been published in the Federal Register and/or the Code of Federal 

Regulations. FCC replaced its 1991 policy statement with a formal rule 

after the policy statement was successfully challenged in court.20 The court 

concluded that the policy was a rule that was promulgated without notice 

and opportunity for comment and, therefore, was invalid. 

The agencies’ authorizing statutes often guide the scope and details of their 

civil penalty relief policies. For example, section 273 of INA generally did 

not permit INS to waive or reduce fines imposed on carriers of passengers 

transported into the United States until the act was amended in 1994 by the 

Immigration and Nationality Technical Corrections Act of 1994. Also, 

certain agencies’ authorizing statutes require that certain minimum fines be 

imposed or that certain factors be taken into consideration when granting 

penalty relief. For example, section 17(a) of the Occupational Safety and 

Health Act of 1970, as amended, states that any employer who willfully or 

repeatedly violates certain statutory provisions or associated regulations 

“may be assessed a civil penalty of not more than $70,000 for each 

violation, but not less than $5,000 for each willful violation.”

Policies Vary in Degree to 

Which All Small Entity 

Enforcement Actions and 

Relief Are Covered

The agencies’ section 223 policies vary in the extent to which they cover all 

civil penalty-related enforcement actions involving small entities and all 

instances in which small entities can receive civil penalty relief. FCC’s, 

OSHA’s, and MSHA’s policies generally apply to any of the agencies’ federal 

civil penalty enforcement actions involving small entities. However, an 

OSHA official said that the agency has interpreted SBREFA as not applying 

to state health and safety programs approved by OSHA.21 Therefore, the 

OSHA enforcement data that we discuss in a later section of this report do 

20United States Telephone Ass’n v. FCC, 28 F.3d. 1232 (D.C. Cir. 1994). 

21The Occupational Safety and Health Act allows states to operate their own safety and 

health programs as long as they are determined by OSHA to be at least as effective as the 

federal OSHA program. Twenty-three states have received delegated authority from OSHA.
Page 15 GAO-01-280 Civil Penalty Relief Policies

not include penalty relief that small entities have received under those state 

programs. 

EPA said states are encouraged, but not required, to adopt the agency’s 

section 223 policies in agency-approved state environmental programs. 

However, those policies cover only a portion of the various types of 

enforcement actions in the agency involving small entities. For example, 

EPA officials said that only two states—Nebraska and Oregon—had 

adopted the agency’s small community policy at the time of our review.22

Also, EPA’s small business policy and the agency’s audit policy both require 

small businesses to voluntarily disclose violations in order to receive civil 

penalty relief. However, small businesses can receive civil penalty relief 

without voluntary disclosure as a result of the regular administration of 

nine environmental statutes EPA administers that permit the use of civil 

penalties.23 Therefore, EPA or state environmental officials could discover 

a violation of one of these statutory requirements by a small entity, propose 

a civil penalty, and provide the entity with either a waiver or a reduction of 

the penalty—all without reference to section 223 of SBREFA. As a result, 

EPA officials said that the data that we discuss later in this report does not 

include all instances in which small entities receive civil penalty relief.

Similarly, INS officials indicated that their two section 223 policies cover 

only a portion of the types of agency enforcement actions, and said that the 

number of small entities receiving penalty relief under the agency’s carrier 

policy represents only a portion of the total number of small entities 

receiving penalty relief under various other sections of INA. For example, 

the officials said that carriers could also receive penalty relief under at 

least five other sections of the act, including section 234 (no advance notice 

of aircraft arrival or aircraft landing at an unauthorized place), section 255 

(employment on passenger vessels of crewmen with certain afflictions), 

and section 256 (improper discharge of alien crewmen). 

22EPA said that states have many other mechanisms they can use to reduce penalties for 

small entities.

23EPA said that these types of penalties address violations involving noncompliance, 

whereas EPA section 223 policies are incentive policies for the regulated community that 

are preventative and forward looking and are designed to encourage companies to selfregulate, voluntarily audit their operations, come into compliance, and even go beyond what 

the law requires.
Page 16 GAO-01-280 Civil Penalty Relief Policies

Policies Vary in Extent to 

Which Small Entities 

Receive Extra Penalty Relief

The selected agencies’ section 223 policies vary in the extent to which they 

provide small entities with more penalty relief than similarly situated larger 

entities. Some of the policies (the FCC, EPA audit, and INS carrier policies) 

provide small entities with no greater penalty relief than they provide to 

any other regulated entity. Under these broad agency policies, small 

entities can receive penalty relief on the basis of other factors (e.g., their 

ability to pay the penalty), but size is not an explicitly relevant factor in 

determining either the amount of the initial penalty assessed or any 

reductions from that initial assessment. Other section 223 policies (EPA’s 

small business and small community policies) apply only to small entities. 

In still other policies (MSHA, OSHA, and INS employment verification), 

small entities can get penalty relief over and above that provided to larger 

entities because they meet certain size-related criteria.24 In some of these 

policies, the smaller the business, the greater the penalty reduction they 

can receive. For example, OSHA’s policy indicates that employers with 101 

to 250 employees can get a 20-percent reduction in civil penalties, 

employers with 26 to 100 employees can get a 40-percent reduction, and 

employers with 25 or fewer employees can get a 60-percent reduction. 

OSHA does not consider employers with more than 250 employees “small 

businesses,” and they therefore are ineligible for size-related penalty relief. 

In four of the five agencies included in our review (EPA, OSHA, MSHA, and 

INS), the agencies’ use of targeted relief for small entities is at least 

sometimes directly traceable to underlying statutes. For example, the 

Occupational Safety and Health Act of 1970, as amended, requires OSHA to 

assess civil penalties taking into account, among other things, “the size of 

the business of the employer being charged.” Similarly, the Federal Mine 

Safety and Health Amendments Act of 1977 requires MSHA to consider, 

among other things, “the appropriateness of such penalty to the size of the 

business of the operator charged.” 

Policies Vary in How Key 

Terms Are Defined

The agencies’ section 223 policies also vary in how certain key terms such 

as small entity and penalty reduction are defined or used.

24However, INS officials said that in some instances, the size of an entity could also make 

penalty relief for small entities less likely. For example, they said that the owner of a small 

business may be more likely to know that his/her employees are illegal aliens than the 

owner of a large business.
Page 17 GAO-01-280 Civil Penalty Relief Policies

Small Entity SBREFA indicated that the term small entity should be defined the same 

way it is defined in the RFA—a small business, a small government, or a 

small organization. The RFA defines each of these terms but identifies a 

process for agencies to establish other definitions.25 For example, the act 

says that the term “small business” has the same meaning as the term 

“small business concern” under section 3 of the Small Business Act, unless 

an agency, after consultation with the Office of Advocacy of the Small 

Business Administration and after opportunity for public comment, 

establishes one or more definitions of such term which are appropriate to 

the activities of the agency and publishes such definition(s) in the Federal 

Register.”26

As previously noted, several of the agencies’ section 223 policies (FCC, INS 

carriers, and EPA audit) provide small entities with no greater penalty 

relief than that provided to larger entities, all other factors being equal. Not 

surprisingly, therefore, the term small entity is undefined in these policies.27

Other agencies’ policies that give small entities extra relief either define the 

term small entity or the agency was able to describe how the term is used in 

the administration of the policy. However, the policies’ definitions of a 

small entity vary among the agencies, and sometimes vary within the same 

department or agency. For example:

• EPA’s small business policy defines a small business as a person, 

corporation, partnership, or other entity that employs 100 or fewer 

individuals across all facilities and operations owned by the business.28

• OSHA’s policy says that small entities eligible for civil penalty relief are 

those with 250 or fewer employees at all work sites at any one time 

during the previous 12 months.

25See 5 U.S.C. 601(3), (4), and (5). The RFA says that a “small governmental jurisdiction” 

generally means governments of cities, counties, or other jurisdictions with a population of 

less than 50,000. A “small organization” is generally defined as any not-for-profit enterprise 

that is independently owned and operated and is not dominant in its field.

26SBA’s current small business size regulations and standards can be found at 65 Fed. Reg. 

5533 (2000).

27EPA noted in its 1998 section 223 report that companies with more than 100 employees but 

that are considered “small entities” under the SBA definition of “small business” could use 

the agency’s audit policy. However, the audit policy is not directed toward small entities 

and, all other factors being equal, they get no greater penalty relief than large entities. 

28EPA officials said this definition is derived from section 507 of the Clean Air Act, which 

explicitly defines a small business as a business with 100 or fewer employees. 
Page 18 GAO-01-280 Civil Penalty Relief Policies

• MSHA’s policy does not specifically define the term small entity. 

Although MSHA traditionally defines a small mine as having fewer than 

20 employees, the agency also sometimes uses SBA’s definition of a 

small entity for the mining industry—500 employees or fewer.29

However, in its regular penalty assessments, MSHA defines the size of a 

regulated entity by either the number of hours worked or by tonnage of 

production.

EPA’s definition of a small government eligible for penalty relief also varies. 

For example, EPA said that any small government or small organization 

employing 100 or fewer individuals is eligible for penalty relief under the 

small business policy. However, EPA’s small community policy is targeted 

toward certain communities on the basis of the number of residents (fewer 

than 2,500), not the number of employees in their local governments. 

Although the INS employment verification policy requires consideration of 

the size of the regulated entity in determining penalty assessments, the 

policy does not define the term small entity. 

Penalty Reduction Most of the agencies’ section 223 policies do not contain an explicit 

definition of a penalty reduction. However, our discussions with officials in 

the agencies indicated that the term is being used differently across the 

agencies. For example, the INS carrier enforcement office considers a 

penalty reduction to be the difference between the penalty imposed on the 

regulated entity and the statutory maximum penalty. For example, if the 

statutory maximum penalty for a particular violation was $3,300 and the 

penalty ultimately imposed on the entity was $1,000, the INS carrier 

enforcement office considers the $2,300 difference to be the amount of the 

penalty reduction. However, EPA officials said that the agency does not 

consider the statutory maximum in determining the amount of penalty 

relief provided under its section 223 policies. Instead, they said that a 

penalty reduction is the difference between the amount initially proposed 

and the amount ultimately assessed. Using the above example with a $3,300 

statutory maximum penalty, if EPA initially determined that the penalty 

should be $1,300 but later reduced the penalty to $1,000, the amount of 

penalty relief provided would be $300. 

The agencies’ policies also differ in how penalty reductions are triggered. 

For example, under OSHA’s policy, penalty reductions are automatically 

29MSHA said that all but approximately 25 mines (less than 1 percent of all mines) meet 

SBA’s definition of a small entity.
Page 19 GAO-01-280 Civil Penalty Relief Policies

provided on the basis of preestablished formulas, and further reductions 

can occur if the initial penalty determination is appealed. Under the INS 

carrier policy, penalty relief can occur upon application by the carrier, or 

automatically under a prearranged memorandum of understanding 

between the carrier and INS.30 Penalty relief under EPA’s small business 

and audit policies is triggered only when the small entity voluntarily 

discloses a violation and asks for relief under the policy. 

Policies Vary in Applicable 

Conditions and Exclusions

Section 223 of SBREFA states that agencies must establish certain 

“conditions and exclusions” in their penalty relief policies. Although the 

statute does not require the use of any particular condition or exclusion, it 

does identify some for possible inclusion. In subsection 223(a), the act says 

that under the appropriate circumstances, “an agency may consider ability 

to pay in determining penalty assessments on small entities.” Subsection 

223(b) lists six conditions and exclusions that agencies may include in their 

penalty relief policies or programs:

• requiring the small entity to correct the violation within a reasonable 

correction period;

• limiting the applicability to violations discovered through participation 

by the small entity in a compliance assistance or audit program operated 

or supported by the agency or a state;

• excluding small entities that have been subject to multiple enforcement 

actions by the agency;

• excluding violations involving willful or criminal conduct;

• excluding violations that pose serious health, safety, or environmental 

threats; and

• requiring a good faith effort to comply with the law.

As table 1 illustrates, the agencies’ section 223 policies and related 

administrative procedures varied in the extent to which they included these 

suggested conditions and exclusions.31 All of the policies excluded small 

30According to the INS carrier policy, carriers who are signatory to such a memorandum of 

understanding will not be required to apply for penalty relief and will get penalty relief 

according to certain performance standards.

31In some cases, the agencies’ section 223 policies contained elements that were related to, 

but not exactly the same as, the elements suggested in SBREFA. For example, one of the 

factors listed in MSHA’s policy was the effect of the penalty on the operator’s ability to 

continue in business. We considered this element the same as “ability to pay.” 
Page 20 GAO-01-280 Civil Penalty Relief Policies

entities from receiving penalty relief if they had been subject to multiple 

enforcement actions. Other common exclusions were violations that 

involved serious health, safety, or environmental threats and violations 

involving willful or criminal misconduct. Only one of the policies limited 

their applicability to violations discovered through participation by the 

small entity in a compliance assistance or audit program—EPA’s audit 

policy. EPA’s small business policy contained this condition until April 

2000. The agency decided to eliminate this requirement in order to make it 

easier for small businesses to take advantage of the policy. Since then, the 

policy has allowed small businesses to receive penalty relief if violations 

are discovered by any voluntary means (e.g., via participation in training 

classes; use of on-line compliance assistance centers; or use of checklists, 

even if not sponsored by an environmental regulatory agency). 

Table 1: Agencies’ Section 223 Policies Vary in Use of Conditions and Exclusions Suggested in SBREFA

a

Reflects an additional administrative procedure applicable in the agencies’ settlement or adjudication 

of civil penalties.

b

Though not explicitly part of the OSHA section 223 policy, OSHA officials noted that a nationwide 

“quick-fix” program applicable to all businesses can provide a small entity with a 15-percent penalty 

reduction for the immediate abatement of certain hazards.

Source: GAO analyses of agencies’ section 223 policies and related administrative procedures or 

policies.

EPA FCC INS OSHA MSHA

Condition or exclusion

Small 

Business Audit

Small 

community Carriers Employers

Ability to pay Xa Xa Xa X Xa Xa Xa X

Reasonable correction 

period

X XX X Xb X

Compliance assistance 

or audit program 

X

Multiple enforcement 

actions 

X X X XX X X X

Willful or criminal 

conduct

XX X X

Health, safety, or 

environmental threats

X XX X X X

Good faith X X X X X X
Page 21 GAO-01-280 Civil Penalty Relief Policies

Subsection 223(b) of SBREFA makes it clear that the conditions and 

exclusions that agencies can include in their small entity penalty relief 

programs and policies are not limited to those suggested in the act. Each of 

the agencies’ policies do, in fact, include other factors. For example:

• FCC’s authorizing statute for civil monetary penalties gives the agency 

the broad discretion to take into account “such matters as justice may 

require.” 

• OSHA’s and MSHA’s authorizing statutes for civil monetary penalties 

require each agency to consider the gravity of the violation as an 

additional policy term. MSHA’s statute also requires consideration of the 

“negligence” of the regulated entity.

• As previously noted, EPA’s small business policy and the agency’s audit 

policy require violations to be voluntarily disclosed in order to qualify 

for certain penalty reductions. EPA officials said that environmental 

statutes also require consideration of such factors as the degree of 

culpability of the violator and the economic benefit derived from the 

violation.

• The INS carrier regulation also requires the INS to consider the 

“effectiveness of the carrier’s screening procedures,” and the “existence 

of any extenuating circumstances.”

• The INS employer sanctions regulation also requires INS to consider the 

“seriousness of the violation” and “whether or not the individual was an 

unauthorized alien.” 

As previously discussed, agency-specific statutes for four of the five 

agencies require them to consider the size of the entity as an explicit 

penalty relief condition. 

Most Agencies Were 

Not Able to Provide 

Enforcement Data in 

the Format Requested

MSHA was the only one of the five agencies that provided all of the data 

required by subsection 223(c) of SBREFA, and it was also the only agency 

that was able to provide us with more recent data on enforcement actions 

against small entities. The other agencies either (1) provided data on 

inspections or small entities, not enforcement actions; (2) said they could 

only provide data on enforcement actions initiated against entities of any 

size, not just small entities; or (3) provided data that were inconsistent and 

incomplete.
Page 22 GAO-01-280 Civil Penalty Relief Policies

Some Agencies Did Not 

Provide Required Data in 

Their 1998 SBREFA Reports

Subsection 223(c) of SBREFA required agencies to report by March 1998 on 

the status of their penalty reduction and waiver programs. Specifically, the 

statute said that agencies should report the number of enforcement actions 

against small entities that qualified or failed to qualify for their program or 

policy and the total amount of penalty reductions and waivers. Although 

this was a one-time reporting requirement, we reviewed the five selected 

agencies’ section 223 reports to obtain data relevant to our second 

objective—to determine how many civil penalty enforcement actions each 

selected agency had initiated against small entities each fiscal year since 

SBREFA’s enactment, and how many of those actions resulted in some 

form of penalty relief.

Two of the agencies—FCC and INS—provided no small entity-related 

enforcement data in their 1998 reports. FCC reported the number of 

enforcement actions taken and the number of persons or entities that 

received penalty cancellations or reductions between June 1996 and 

January 1998 in relation to all regulated entities, not just small entities.32

INS noted in its report that the agency had investigated approximately 

6,000 businesses during fiscal year 1997 for violations of section 274A of 

the INA, resulting in a notice of intent to fine in 888 of those cases. 

However, INS did not indicate how many of those investigations or notices 

involved small entities. 

Two other agencies provided data in their reports that focused on small 

entities and offered useful insights into their section 223 programs, but that 

were not exactly what the statute required. EPA reported that through the 

end of fiscal year 1997, 95 small entities had received relief under its 

section 223 program, 10 small entities had not qualified for the program, 

and 44 cases were still under consideration. EPA also reported that nearly 

$900,000 in penalties had been reduced or waived through the program. 

However, EPA’s data focused on the number of small entities that had and 

had not received relief under the program, not the number of enforcement

actions initiated against small entities that qualified and failed to qualify for 

the program.33 Also, as EPA noted in its report, the data may understate the 

32In its reply, FCC indicated the number of enforcement actions in which licensees requested 

a reduction or waiver of civil penalties because of an “inability to pay”. However, FCC did 

not indicate how many of these orders involved small entities.

33In commenting on a draft of this report, EPA officials told us that the number of small 

entities was equivalent to the number of enforcement actions, and therefore said that the 

agency complied with subsection 223(c) of SBREFA.
Page 23 GAO-01-280 Civil Penalty Relief Policies

number of small entities receiving penalty relief and the dollar amount of 

that relief. The report presented data for penalty relief provided to small 

entities under what EPA considered its section 223 policies (as the statute 

required). However, the report did not reflect any penalty relief that small 

entities may have received under EPA’s general enforcement and penalty 

policies (i.e., when the small entity did not voluntarily disclose the 

violation) or relief granted through state enforcement programs.34

In its 1998 report, OSHA provided data showing the number of 

“enforcement actions” (14,550) between March 29, 1997, and December 31, 

1997, in which penalties were reduced by size of business categories (e.g., 1 

to 10 employees, 11 to 20 employees, etc.).35 However, the report also 

indicated that the unit of analysis was small entities, not enforcement 

actions. OSHA officials told us during this review that the data actually 

reflect the number of inspections in which penalties were reduced. This 

difference in the unit of analysis can be important because a single 

inspection can involve a number of enforcement actions. In its report, 

OSHA also provided the dollar amount of penalty reductions provided to 

small entities during this period ($107 million) and said that about threequarters of this amount was based solely on the size of the businesses. 

MSHA’s 1998 report provided the required enforcement data in the manner 

that the statute stipulated. MSHA said that between April 1, 1997, and 

December 31, 1997, the agency took approximately 77,000 enforcement 

actions against small entities. Of these, MSHA said that about 48,000 

actions were single penalty assessments that did not qualify for a penalty 

reduction, and the remaining 29,000 actions received penalty reductions 

totaling about $2.1 million. 

Time Frames Covered by the 

Data Differed

Subsection 223(c) of SBREFA required agencies to submit their reports by 

March 1998 but did not specify the time frames that the agencies’ 

enforcement data should cover. As a result, the data that the agencies 

provided varied in the dates covered. For example, MSHA’s data covered 

the period from April 1, 1997, until December 31, 1997. FCC’s data covered 

the period from June 1996 to January 1998. EPA indicated that its data was 

34According to EPA, states are responsible for the vast majority of environmental programs, 

and small entities have sought civil penalty relief from state regulators. 

35OSHA officials said that this is also the number of enforcement actions involving small 

entities, because OSHA automatically provides penalty relief for small entities. 
Page 24 GAO-01-280 Civil Penalty Relief Policies

“through fiscal year 1997” but did not indicate the starting point for the 

data.36

Most Agencies Still Could 

Not Provide More Recent 

Data in the Format 

Requested

Given the difficulty in using most of the data that the agencies provided in 

their 1998 reports, we asked each agency to provide enforcement data for 

each fiscal year since SBREFA’s enactment (i.e., 1997, 1998, 1999, and 

2000). Specifically, we asked the agencies to identify the number of civil 

penalty enforcement actions that they had initiated in each year, the 

number initiated against small entities, and how many of the enforcement 

actions against small entities did and did not result in a waiver or a penalty 

reduction. We also asked the agencies to provide data on the dollar amount 

of the civil penalties against small entities that were waived or reduced. 

SBREFA does not currently require agencies to maintain this information. 

MSHA was the only one of the five selected agencies that provided the 

enforcement data that we requested. (See table 2.) The data indicate that 

the percentage of enforcement actions against small entities that received 

some type of penalty relief ranged from about 38 percent in fiscal year 1997 

to about 43 percent in fiscal year 1999. The average amount of penalty per 

enforcement action ranged from about $233 (1997) to about $274 (1999). 

MSHA officials said that the agency rarely provides full waivers of civil 

penalties because the agency generally requires a minimal $55 fine for each 

enforcement action initiated that involves a minor violation that is abated 

in a timely manner.37

36In commenting on a draft of this report, EPA officials said the data covered the period from 

March 30, 1996, through September 30, 1997. 

37See 30 C.F.R. § 100.4. 
Page 25 GAO-01-280 Civil Penalty Relief Policies

Table 2: MSHA Enforcement Actions and Related Penalty Relief for Small Entities—Fiscal Years 1997 Through 2000 

Note: MSHA considered a small entity as any mining business with 19 or fewer employees. 

Source: MSHA and GAO analysis.

The other agencies varied in their ability to provide relevant data. OSHA 

provided data on the number of inspections involving small entities, not the 

number of enforcement actions. (See table 3.) OSHA officials said that their 

database is structured in terms of inspections, not enforcement actions, 

and that the database does not reflect how many enforcement actions 

occurred during each inspection. 

Table 3: OSHA Inspections and Related Penalty Relief for Small Entities—Fiscal Years 1997 Through 2000

Note: OSHA considered a small entity as any business with 250 or fewer employees. Also, the data are 

based on OSHA enforcement actions at the federal level and exclude any penalty relief that small 

entities may have received under state health and safety programs approved by OSHA.

Source: OSHA and GAO analysis.

Fiscal Year

1997 1998 1999 2000

Number of enforcement actions involving small entities in which 

a penalty was proposed

103,515 116,949 106,643 105,767

Number of enforcement actions in which small entities received 

penalty relief

39,015 45,225 45,555 41,090

Percentage of enforcement actions in which small entities 

received penalty relief

37.7% 38.7% 42.7% 38.8%

Amount of penalties reductions for small entities (in millions) $9.09 $10.77 $12.48 $11.05

Fiscal Year

1997 1998 1999 2000

Number of enforcement inspections involving small entities in which 

a penalty was proposed

19,617 18,427 17,979 17,187

Number of enforcement inspections in which small entities received 

penalty relief

19,617 18,427 17,979 17,187

Percent of enforcement inspections in which small entities received 

penalty relief

100% 100% 100% 100%

Amount of penalty reductions for small entities (in millions) $88.03 $124.17 $123.15 $127.00

Amount of penalty reductions for small entities based on size of 

entity (in millions)

$72.85 $101.65 $101.87 $104.92
Page 26 GAO-01-280 Civil Penalty Relief Policies

The data that OSHA provided indicated that every inspection involving a 

small entity that resulted in a proposed penalty also resulted in a penalty 

reduction. As previously noted, OSHA automatically applies its penalty 

relief criteria to proposed penalties. Small entities can receive the largest 

penalty reductions, and the smaller the entity the larger the reduction. 

During each of the last 3 fiscal years (1998 through 2000), OSHA provided 

small entities with more than $120 million in penalty relief, and in each year 

more than 80 percent of the reductions provided to small entities were 

based solely on the size of the entities. 

The data that EPA provided to us reflected enforcement under the three 

elements of its section 223 programs, not all enforcement actions in the 

agency. Also, the data provided were inconsistent, incomplete, and not in 

the format that we requested. For example, for fiscal year 1997, EPA said 

the following: 

• Sixty-one small businesses disclosed violations under the agency’s audit 

policy, 19 received some form of penalty relief, and 36 cases were still 

“under consideration” for relief at the end of the fiscal year. It was not 

clear how the remaining six cases were resolved, and EPA did not 

indicate the amount of penalty relief that was provided. 

• Twelve small businesses disclosed violations under the agency’s small 

business policy, and 8 received penalty relief after the fiscal year had 

ended. However, EPA did not indicate how the remaining four cases 

were resolved or the amount of penalty relief that was provided. 

• Seventy-six small communities “utilized” the agency’s small community 

policy, but EPA did not indicate whether all of the communities received 

relief and, if so, the amount of relief provided. 

The data that EPA provided for the other fiscal years were even less 

complete. For example, EPA said that 76 facilities disclosed violations 

under the small business policy in fiscal years 1998 and 1999, and that “all 

businesses that qualified for relief were granted a 100% waiver of the
Page 27 GAO-01-280 Civil Penalty Relief Policies

gravity-based penalty.” However, EPA did not indicate how many of the 76 

facilities qualified for relief.38

Neither FCC nor INS could provide us with any data on civil penalty 

enforcement actions against small entities. Officials in both agencies told 

us that because their agencies do not provide special civil penalty relief 

based on the size of the regulated entity, they do not keep data on 

enforcement actions by size of entity. 

Most Agencies Could 

Not Identify 

Paperwork-Related 

Enforcement Actions 

Against Small Entities 

We also asked agencies to determine whether any of the enforcement 

actions during this period that did not result in penalty relief involved 

paperwork requirements. SBREFA does not require agencies to maintain 

this information. Because MSHA was the only agency that could identify 

the number of enforcement actions against small entities that did not result 

in some type of penalty relief, it was also the only agency that could 

identify the number of such actions that involved a paperwork 

requirements. (See table 4.) 

38In EPA, civil penalties are made up of two components: (1) the gravity of the violation 

(e.g., the nature; duration; and environmental, safety, or public health impacts of the 

violation) and (2) the economic benefit that the small entity derives from the violation. 

EPA’s section 223 policies allow the agency to reduce gravity-based penalties, and provide 

the agency with the discretion to waive economic benefit penalties, as appropriate. 

However, EPA officials said that economic benefit penalties are rarely imposed. In 

commenting on a draft of this report, EPA officials said that all 76 facilities qualified for a 

waiver of both gravity-based and economic benefit penalties. 
Page 28 GAO-01-280 Civil Penalty Relief Policies

Table 4: Percent of MSHA Enforcement Actions Involving Small Entities Without Penalty Relief That Involved Paperwork 

Requirements—Fiscal Years 1997 Through 2000

Note: MSHA considered a small entity as any mining business with 19 or fewer employees. 

Source: MSHA and GAO analysis.

The MSHA data indicated that, in each year, less than 9 percent of the 

enforcement actions without some type of penalty reduction involved 

paperwork requirements. MSHA said that most of these actions imposed 

single $55 fines that were required by regulation or involved more serious 

violations that could have an impact on the health and safety of employees. 

MSHA provided the following examples of what they considered to be 

“serious” paperwork-related violations:

• MSHA regulations require that all electrical equipment must be 

frequently examined, tested, and properly maintained by a qualified 

person to ensure safe operating conditions, and that a record of such 

examinations must be kept and made available to miners and 

representatives of the Secretary of Labor. Failure to keep such records, 

although technically a “paperwork” violation, may represent failure to 

maintain the equipment in the specified manner. 

• MSHA regulations also require that self-propelled mobile equipment to 

be used during a shift must be inspected before being placed in 

operation on that shift. Any defects on the equipment that are not 

corrected immediately must be reported to and recorded by the mine 

operator. Therefore, an MSHA inspection that discovers defects in selfpropelled equipment may also be recorded as a paperwork-related 

violation. 

FCC and INS officials said they could not provide data on enforcement 

actions involving small entities because their agencies do not distinguish 

between large and small entities. FCC provided information on certain 

enforcement actions involving paperwork requirements, but the data were 

Fiscal Year

1997 1998 1999 2000

Number of enforcement actions in which small entities did not 

receive penalty relief

64,500 71,724 61,088 64,677

Number of enforcement actions against small entities that did not 

result in relief that involved paperwork requirements

4,537 5,146 5,162 4,654

Percentage of enforcement actions against small entities that did 

not result in relief that involved paperwork requirements

7.0% 7.2% 8.5% 7.2%
Page 29 GAO-01-280 Civil Penalty Relief Policies

for all enforcement actions, not just those against small entities. EPA 

officials said the agency does not maintain data on paperwork-related 

enforcement actions. OSHA officials said that there are no enforcement 

actions involving small entities that do not receive some form of penalty 

relief under the agency’s section 223 policy. Therefore, there are no 

examples of such actions that involve paperwork requirements. 

Conclusions Congress provided agencies with substantial discretion in developing their 

section 223 civil penalty relief policies. Not surprisingly, the agencies used 

that discretion and developed policies that vary substantially. For example, 

some of the agencies’ policies cover all civil penalty enforcement actions 

involving small entities, but other policies cover only some such actions. 

Some of the policies apply only to small entities or provide them with extra 

civil penalty relief, and other policies provide small entities with no greater 

relief than large entities. The agencies also varied in how key terms were 

defined and in their policies’ conditions and exclusions. This variability 

notwithstanding, all of the agencies’ policies and programs that we 

reviewed were within the discretion afforded to them by SBREFA. 

Agencies were allowed to limit the scope of their programs to only a 

portion of their enforcement actions against small entities, and they could 

decide not to give small entities any additional civil penalty relief. Agencies 

were also allowed to establish whatever conditions or exclusions they 

wanted for participation in their programs, subject to the requirements and 

limitations in other statutes.

Agencies’ differing missions and operating environments may legitimately 

require differences in the agencies’ civil penalty relief policies. However, 

some elements of agencies’ policies can be strengthened and made more 

consistent without impinging on agencies’ flexibility. For example, if 

Congress wants agencies’ section 223 policies to be more inclusive, it could 

require that those policies cover all instances in which small entities can 

receive civil monetary penalties. Also, if Congress wants small entities to 

receive more civil penalty relief than is provided to larger entities (unless, 

of course, larger entities receive a complete penalty waiver), it could 

require that agencies’ policies or programs provide extra reductions for 

small entities. These kinds of changes would improve small entities’ 

opportunities to receive relief from federal civil monetary penalties. 

However, Congress could still permit the agencies’ policies to delineate 

relevant conditions and exclusions under which the penalty relief would be 

authorized without allowing the conditions and exclusions to be so 

restrictive that they unduly limit the scope of the policies themselves. For 
Page 30 GAO-01-280 Civil Penalty Relief Policies

example, agencies could continue to exclude small entities that have been 

subject to multiple enforcement actions, exclude violations involving 

willful or criminal conduct, and require that entities correct the violations 

within a reasonable period. 

Even if agencies made these changes to their section 223 policies, Congress 

would still be unable to oversee the implementation of those policies 

without data. Agencies are not currently required to collect data on the 

implementation of their civil penalty policies under section 223; the statute 

imposed a one-time reporting requirement that expired in 1998, and some 

of the agencies failed to satisfy this requirement. To facilitate congressional 

oversight, Congress could require agencies to maintain certain types of 

implementation data, such as (1) the number of enforcement actions in 

which civil penalties were proposed, (2) the number of those actions 

involving small entities, (3) the number of those actions in which small 

entities received some type of penalty relief, and (4) the dollar amount of 

the relief provided. By maintaining such data, agencies would be able to 

make the data available when Congress exercises its oversight duties in 

this area. The data would also help the agencies themselves understand 

how their section 223 policies are operating. When providing such data to 

Congress, agencies should clearly define key terms such as “small entity” 

and “penalty reduction” so that Congress can understand whether 

variations in agencies’ data are caused by differences in the 

implementation of agencies’ section 223 programs or other factors. 

Matters for 

Congressional 

Consideration 

If Congress wishes to strengthen civil penalty relief for small entities, it 

should consider amending section 223 of SBREFA to require that agencies’ 

policies or programs (including relevant conditions and exclusions) cover 

all of the agencies’ civil penalty enforcement actions involving small 

entities and provide small entities with more penalty relief than other 

similarly situated entities. Also, to facilitate congressional oversight in this 

area, Congress should consider amending the act to require agencies to 

maintain data by fiscal year or some other time period on such factors as 

the number of enforcement actions involving all small entities, the number 

of enforcement actions that resulted in penalty reductions, and the amount 

of penalty relief provided. Any such data provided to Congress should 

clearly indicate how the agency defines key terms such as “penalty 

reduction” and “small entities.” 
Page 31 GAO-01-280 Civil Penalty Relief Policies

Agency Comments and 

Our Evaluation

On January 4, 2001, we sent a draft of this report to the Secretary of Labor, 

the Attorney General, the Chairman of the FCC, and the Administrator of 

EPA for their review and comment. Department of Justice officials said 

they had no comments on the draft report. On January 16 and 18, 2001, FCC 

and DOL officials told us they had no comments on the matters for 

congressional consideration but provided several suggestions to clarify 

particular sections of the report, which we included as appropriate. On 

January 24, 2001, we met with the Director of EPA’s Office of Regulatory 

Enforcement and the Director of the agency’s Office of Compliance to 

discuss the draft report. During the meeting, the Directors provided several 

suggestions to clarify certain sections of the report. For example, they 

requested that the report clearly state that SBREFA does not currently 

require agencies to maintain the information that we requested in relation 

to our second and third objectives. They also said the report should 

indicate that EPA views information collection requirements as the 

foundation of many health and safety statutes, and that violations of those 

requirements should not automatically be treated as minor infractions 

meriting a waiver of civil penalties. We made these and other changes to 

the draft report, and provided the Directors with a revised draft reflecting 

the changes made. 

On January 26, 2001, the Directors of EPA’s Offices of Regulatory 

Enforcement and Compliance provided written comments on the revised 

draft report, which are reproduced in appendix I. The Directors said they 

found our evaluation helpful and were taking steps to implement some of 

the report’s “recommendations.” For example, the Directors said they were 

planning to begin collecting data on the number of small businesses taking 

advantage of EPA’s audit policy. However, they also provided several 

“overarching comments” regarding the report. First, they said that 

“[d]istinguishing between requirements that have an information collection 

request and those that do not is an inaccurate litmus test for differentiating 

‘major’ and ‘minor’ violations.” Second, they said it is not clear that 

penalties issued against small businesses in EPA enforcement actions are a 

“significant concern,” noting that EPA reduces penalties below the 

statutory maximums, settles most cases below the initial penalty offers, 

and is required by the agency’s statutes and penalty policies to consider 

ability to pay, “which enables EPA to take small business concerns into 

account in its enforcement actions.” The Directors also said EPA believes 

that penalty incentives should reward those who make voluntary efforts to 

comply with regulatory requirements, and that agencies implementing 

SBREFA programs should continue to consider the penalty factors that 
Page 32 GAO-01-280 Civil Penalty Relief Policies

Congress has established (e.g., recovery of any economic benefit of 

noncompliance). 

We did not indicate in our draft report that violations involving an 

information collection were, in any sense, “minor” violations. In fact, as 

previously indicated, we added a sentence to the revised draft that the 

Directors reviewed reflecting EPA’s and other agencies’ concerns about this 

issue in relation to legislation that Congress had considered. Regarding the 

Directors’ second point, it is not clear how EPA can determine whether 

penalties issued against small entities are a significant concern without the 

enforcement data that the Directors said the agency does not possess or 

that they described as “inadequate.” Also, an entity’s “ability to pay” may be 

unrelated to whether that entity is considered “small” for purposes of 

SBREFA. Therefore, taking into account a business’ ability to pay does not 

ensure that small business concerns are taken into account. Regarding the 

Directors’ last points, we noted in the conclusion of our draft report that 

even if agencies’ policies were required to provide extra reductions for 

small entities, agencies would still be free to impose other conditions and 

exclusions on the receipt of penalty relief. Those factors could include, 

among other things, consideration of an organization’s voluntary efforts to 

comply and congressionally established factors. 

The EPA Directors also provided several “technical” comments on the draft 

report. In several of these comments, the Directors stated the agency’s 

position on various issues but did not recommend changes to the draft 

report. For example, in one such comment, they emphasized that EPA 

offers penalty relief to small entities both through its section 223 policies 

and through its policies implementing environmental statutes, and 

indicated that EPA views “ability to pay” separate and distinct from “ability 

to continue in business.” In other comments, the Directors noted that EPA 

data tracking for the agency’s voluntary disclosure policies was 

“inadequate” (although improvements were being made), and that other 

data that we requested on the agency’s small communities policy did not 

exist. 

However, in other technical comments the Directors suggested changes to 

the draft report. For example, they said the report should indicate that an 

enforcement program needs to meet many competing goals, and said 

addressing the recommendations in the draft report may create tensions 

with our previous recommendations regarding equitable treatment for
Page 33 GAO-01-280 Civil Penalty Relief Policies

comparable violations.39 Although we agree conceptually that an agency’s 

enforcement program may face competing goals, we do not believe that 

providing penalty relief for small entities and maintaining data on the 

amount of relief provided are inconsistent with a strong civil penalty 

program. Furthermore, we do not believe that the matters for 

congressional consideration in this report conflict with our previous 

recommendations. In the report that the Directors cited, we listed a 

number of factors that an agency could appropriately consider when 

determining the penalties to be imposed (e.g., the severity of the violation 

and the degree of economic benefit obtained). With the enactment of 

section 223 of SBREFA (less than 2 weeks after the publication of our 

report), the size of the entity involved in the violation became yet another 

factor that agencies could legitimately consider when determining 

equitable penalty amounts. 

In another comment, the Directors said the number of small entities 

described as having received relief in EPA’s 1998 report also represented 

the number of enforcement actions taken during the reporting period. 

Therefore, they said the information that subsection 223(c) of SBREFA 

required be included in the agency’s report was, in fact, included. However, 

readers of EPA’s 1998 report were not provided this information at the time 

that the report was issued. Therefore, readers had no way of knowing 

whether the information that EPA provided (on the number of small

entities receiving penalty relief) was consistent with the statutory 

requirement (number of enforcement actions resulting in penalty relief). In 

the revised draft report that the Directors reviewed, we had already noted 

that, in commenting on this report, EPA said the number of small entities 

was equivalent to the number of enforcement actions taken. Therefore, no 

changes were made to the final report. 

As arranged with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days after the 

date of this report. At that time, we will send copies of this report to 

Senator Richard J. Durbin, Ranking Member of the Subcommittee; the 

Honorable Elaine Chao, Secretary of Labor; the Honorable John Ashcroft, 

U.S. Attorney General; the Honorable Michael K. Powell, Chairman of the 

Federal Communications Commission; and the Honorable Christine Todd 

39GAO/RCED-96-23.
Page 34 GAO-01-280 Civil Penalty Relief Policies

Whitman, Administrator of the Environmental Protection Agency. We will 

also make copies available to others on request.

If you have any questions regarding this report, please contact me or Curtis 

Copeland on (202) 512-6806. Key contributors to this assignment were John 

Tavares and Aaron Shiffrin. 

Sincerely yours,

Carlotta C. Joyner

Director, Strategic Issues
Page 35 GAO-01-280 Civil Penalty Relief Policies
Page 36 GAO-01-280 Civil Penalty Relief Policies

Appendix I

Comments From the Environmental 

Protection Agency ApendxiI
Appendix I

Comments From the Environmental 

Protection Agency

Page 37 GAO-01-280 Civil Penalty Relief Policies
Appendix I

Comments From the Environmental 

Protection Agency

Page 38 GAO-01-280 Civil Penalty Relief Policies
Appendix I

Comments From the Environmental 

Protection Agency

Page 39 GAO-01-280 Civil Penalty Relief Policies
Appendix I

Comments From the Environmental 

Protection Agency

(410601) Letr Page 40 GAO-01-280 Civil Penalty Relief Policies
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