Environmental Audit in the United States

Environmental Audit in Environmental Law

An examination of a facility’s or company’s compliance with environmental laws and regulations. Audits may focus on one location, as in the case of an environmental assessment, or they may be broader and cover many facilities.

Reasons for Environmental Audits

Audits may be done prior to an acquisition of a company to determine whether liabilities may be hiding in the wing. In situations involving financing, they are usually required by the lender. Another type of audit is done by companies to determine whether they have problems they have not yet addressed. Depending on the type of business, audits may take days or weeks to complete. The results can be used to find problems, determine the cost of compliance, or identify methods to prevent pollution and reduce waste. The process can be used to train employees and sensitize them to environmental issues.

Benefits of Environmental Audits

Environmental violations subject the violator to numerous penalties. Today, it is not uncommon for the Environmental Protection Agency (EPA) to bring criminal charges, and even in cases that remain civil, penalties can be as high as $25,000 per day per violation.

When the EPA discovers a violation, it chooses whether to enforce the law or not. Since the agency is responsible for overseeing many statutes and thousands of facilities, it is inclined to select cases to enforce based on the message it will give to similar facilities. History of violations is considered, so companies benefit if they check their own compliance records and avoid building a negative record.

Both the EPA and the Occupational Safety and Health Administration have power to inspect regulated facilities. Audits can reveal weaknesses and give the business an opportunity to correct them before the regulators appear.

Another purpose of an audit is to minimize criminal liability and corporate exposure. Environmental laws are so broadly written that often the EPA can select either criminal or civil enforcement. Thoroughly investigating and addressing areas of concern reduces the chance of either option being exercised.

Corporate officials, directors, and managers may be named as defendants right along with the company. Companies can be fined; people can go to jail. A strong system of checking for compliance along with follow up shows commitment to environmental compliance. That in itself may assist the company and the individuals.

The U.S. Sentencing Guidelines operate to standardize the types of penalties levied on criminal defendants. One factor that lightens the sentence is the existence of an auditing program.

Finally, if the EPA enforces, it can require the company to undergo an audit. They are common not only in administrative actions but also civil suits.

Disadvantages of Audits

Well designed investigations require time, money, and manpower. Audit teams must be given enough freedom to examine anything that is compliance related. Specialists may be necessary, if the business does not already have expertise in-house. Also, the audit must be properly managed.

Because audits usually have little to do with the primary purpose of the business, they may be disruptive to the company Records will have to be searched, processes examined, and interviews conducted. The audit teams can affect the productivity of employees and managers.

The most difficult issue for many companies is the documentation. Identifying a problem in a report raises the awareness of the business. If it is not corrected, the offense may become a criminal offense because a “knowing” violation is occurring.

The most difficult issue for many companies is the documentation. Identifying a problem in a report raises the awareness of the business. If it is not corrected, the offense may become a criminal offense because a “knowing” violation is occurring.

Also, when documents are created, they can easily become evidence in a lawsuit. Some companies attempt to address this problem by having an attorney oversee the work of the audit team, hoping they can claim a privilege against disclosure if necessary later. Another approach is to have the audit teams identify only facts, without statements of violations or recommended action. The Department of Justice issued a document about using such evidence against a company or person when the audit was voluntary. The main focus is what happened after the audit.

Examinations of compliance can be quite useful to achieve and maintain compliance. It is crucial, however, for the company to have a commitment to correct problems after they are found. Otherwise, the benefits of an audit are greatly overshadowed by the liabilities.
Based on “Environment and the Law. A Dictionary”.