Policy audit

If the violations were discovered and reported to the EPA in compliance with the EPA s Audit Policy, complete or 75 percent penalty mitigation may be avadable. ... 

Note that this penalty reduction is greater than the 75 percent penalty reduction that would have been available under the Audit Policy for a violation that was self-reported but was not discovered as the result of an audit or application of a compliance monitoring program. 

The Audit Policy should be consulted to determine if a complete or 75 percent mitigation of penalties is available. ... 

See Chapter 14, Penalties and Enforcement, for a complete discussion of the Audit Policy and the mitigating factors applicable to all the TSCA ERPs. 

In the environmental field, the United States Environmental Protection Agency (EPA) established its Incentives for Self-Policing Discovery, Disclosure, Correction and Prevention of Violations (Audit Policy). It permits complete mitigation of civil penalties if the violator complies with aU of its requirements, one of which is discovery of the violation through either an audit or application of a compliance management system. 

The list of elements is taken directly from the Audit Policy, 65 Fed. Reg. 19618,19625 (Apr. 

Most EPA Regional offices apply these criteria strictly, and ask probing questions of companies seeking to take advantage of the Audit Policy benefits. In at least one instance the EPA seriously questioned whether a compliance management system could qualify because it did not require feedback to a person who initiated a request for a change to confirm that the change had been made properly. The requirement of a feedback loop is not explicitly stated in the Audit Policy, but is necessitated by it. ... 

Quarantining also shows that the company has taken all steps reasonably necessary to mitigate the violation, which can help to reduce penalties, as discussed in connection with the EPA s Enforcement Response Policies and Audit Policies, infra. 

Most companies begin their analysis of the potential ramifications that could follow a TSCA violation by determining if they meet the Audit Policy criteria for complete penalty mitigation. If they do meet all of the criteria, then the dollar value of the potential penalties that they have avoided becomes an academic question. However, the Audit Policy assumes familiarity with some of the terms in the ERPs, and so it is helpful to discuss the ERPs first. 

The EPA will also take prior violations into account in determining a penalty. Under the ERPs, the EPA will not increase a penalty for a self-reported violation because of prior violations. The EPA will only increase a penalty under an ERP for prior violations if the violation for which it is calculating the penalty is not self-reported. In contrast, if a company has a history of TSCA violations it may not qualify for the penalty reductions under Audit Policy, and should consider self-reporting imder the applicable ERP. 

EPA established its Audit Policy to encourage companies to self-report and self-correct TSCA violations. It states the EPA s policy of forgiving any penalties it could assess, or forgiving 75 percent of the penalties, if a self-reporting company meets its prerequisite conditions. Over thirty-five hundred different entities had resolved violations by using the Audit Policy through mid-2008. ... 

It is important to keep in mind that the Audit Policy is simply a policy, and its application rests in the discretion of the agency. It does not have the force... 

Fed. Reg. 19618 (Apr. 11, 2000) [hereinafter Audit Policy]. The Audit Pohcy supplanted an earlier version published in 1995 in the Federal Register at 60 Fed. Reg. 66706 (Dec. 22, 1995). The 1995 policy is no longer pertinent, except for the historical development of amnesty policies in general. 

The Audit Policy offers complete mitigation of the possible penalties for a violation of environmental laws if nine conditions are met ... 

Ihe EPA Office of Regulatory Enforcement issued an Audit Policy Interpretive Gnidance (Jan. 1997) and Audit Policy Frequently Asked Questions (2007). available through http // www.epa.gov/compliance/incentives/auditing/auditpolicy.html. 

The Audit Policy definition of environmental audit is as follows ... 

The Audit Policy leaves a lot of room to argue that a fairly informal internal review constitutes an audit, so long as there is a systematic approach, records of the audit data, analysis, findings, and recommendations, some schedule for conducting audits, and provided that the auditors are not the same people whose functions are being audited. 

In contrast to its relative silence on what constitutes an audit, the EPA detailed its concept of a compliance management system that meets the Audit Policy requirements. Such a system must have six elements, designed to motivate employees to prevent, detect and correct violations ... 

If an audit was begun voluntarily and later embodied in a settlement agreement, then the Audit Policy may still be applied to mitigate penalties. ... 

Prompt disclosure of a TSCA violation means only one thing in the Audit Policy self-reporting within twenty-one days of discovering the potential violation, or the following business day if the twenty-first day is on a weekend or Federal holiday. ... 

The types of imminent discovery that preclude application of the Audit PoKcy are an EPA civil investigation that has already begun, a third-party formal or informal complaint or notice of intent to sue, a whistleblower report, or any other event that makes governmental discovery imminent If the company does not know about a civil investigation that has already begim, the EPA may still mitigate penalties under the Audit Policy. 

The EPA recognized that a company with multiple facihties may operate those facilities independently of each other, and that an audit at one facility will not reach another commonly owned facility. Therefore, a company with multiple facilities can take advantage of Audit Policy penalty mitigation for violations at facilities where discovery of the potential violation is not imminent. The EPA did not allude to the fact that it audits facility-by-facility, especially when commonly owned facilities are in different EPA Regions, but that provides an additional justification for encouraging companies to come forward to report violations at other of its facilities, even if the EPA is actively auditing one of those facilities. 

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