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On Jan.15,1997, Assistant Administrator for the U.S. Environmental Protection Agency's (EPA) Office of Enforcement and Compliance Assurance, Steve Herman, issued an important document entitled Audit Policy Interpretive Guidance. The guidance, which is presented as a series of generic questions and answers, is intended to assist the government and regulated entities in implementing EPA's 1995 audit policy, titled Incentives for Self-Policing: Discovery, Disclosure, Correction, and Prevention of Violations, but known commonly as the Audit Policy.
According to EPA, the guidance is based on "nationally significant issues" that EPA headquarters, in consultation with Agency regional offices, has addressed over the past year or so. In the process of evaluating these issues, EPA identified numerous interpretive issues that would benefit from additional guidance. The interpretive guidance provides this muchneeded additional clarification, and in the process, answers questions that have been repeatedly raised since 1995, when the Audit Policy was issued.
Background
Before reviewing the guidance, it may be helpful to provide general background on EPA's Audit Policy. EPA issued its policy on environmental auditing a little over two years ago. The policy is intended to encourage selfpolicing and voluntary disclosure while, at the same time, providing guidance on situations where EPA will consider mitigating civil penalties.
The cornerstone of EPA's policy is its promise not to seek gravity-based (i.e., non-economic benefit) penalties and generally not recommend criminal prosecution against entities where violations are discovered through voluntary audits and they are both disclosed and corrected. If EPA decides nonetheless to seek gravity-based penalties, the Agency will reduce them by as much as 75 percent for violations that are voluntarily discovered and promptly disclosed and corrected, even if not found through a formal audit or through due diligence.
For EPA to decline to seek or to reduce gravity-based penalties under the Audit Policy, entities must satisfy certain conditions:
Audit/due diligence - The violation must have been discovered through an environmental audit or "an objective, documented, systematic procedure or practice reflecting due diligence." EPA reserves the right to make public a company's due diligence efforts as a condition of penalty mitigation.
- Voluntary discovery - The violation must have been identified voluntarily and not through a monitoring, sampling or auditing procedure that is required by statute, regulation, permit, or judicial...