From time-to-time, Caltha will receive calls requesting an “environmental audit” of a property. Upon further discussion, it is usually determined that they are actually looking for an “environmental assessment”. It is not unusual for the terms “audit” and “assessment” to be used interchangeably. However, the two processes are very different, and understanding the differences is important to appreciating the different outcomes from audits and assessments.

Audits. The goal of an audit is to collect objective audit evidence to compare to specific compliance requirements. An auditor will typically review documentation relating to each compliance requirement. Once an auditor reviews an adequate sampling of documentation, he/she may conclude the auditee is/is not in compliance with the requirements. In the absence of documentation, it is difficult for an auditor to conclude that requirements are being met.

Environmental audits follow a similar approach. First, the purpose is to demonstrate compliance (or non compliance) with specific regulatory requirements. The status of regulatory compliance may be very important to a prospective Buyer of the business, who made need to budget to correct shortcomings.

Assessments. The goal of an assessment (specifically an environmental site assessment) is to conduct an evaluation within a specified level of effort to identify environmental issues relevant to hazardous substances or petroleum (i.e., recognized environmental conditions). In the case of an assessment, the absence of any information indicating that relevant issues exist leads to the conclusion that no recognized environmental conditions exist.

The assessment approach is the accepted practice for evaluating the environmental risks associated with real estate. As stated in the ASTM standard practice (E 1527-05) for these assessments, this approach is intended to reflect a commercially prudent and reasonable inquiry”; however, it is not meant to be “an exhaustive assessment of a clean property…There is a point at which the cost of information obtained or the time required to gather it outweighs the usefulness of the information and, in fact, may be a material detriment to the orderly completion of transactions.” The assessment practice isintended to reduce, but not eliminate, uncertainty regarding the potential for recognized environmental conditions …, and … recognizes reasonable limits of time and cost.”

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