Many companies and other regulated entities struggle to balance the benefits and risks associated with conducting environmental compliance audits, and more importantly, what to do if non-compliance issues are uncovered, especially in the context of environmental due diligence.
EPA and numerous States have enacted various “audit policies” to reduce the regulatory risks associated with compliance auditing. An “audit policy” generally applies to the settlement of claims for civil penalties for any violations under environmental statutes. It provides incentives (relief from penalties) when regulated entities discover, disclose, and correct certain types of violations. An audit policy may not cover all types of environmental violations and conditions may exist that limit its applicability.
Some States with Self-Disclosure Audit Policies include:
An “audit policy” is different than “audit privilege” or “audit immunity”. A number of States have passed self-audit “privilege” and/or “immunity” laws (note: this is not the same as “attorney-client privilege”). Most privilege laws protect the disclosure of audit reports. For example, in some states, under specified conditions, an audit report is not admissible as evidence in any civil or criminal proceedings. In most cases immunity state laws, under certain specified conditions, gives a person immunity from fines and in some cases criminal penalties related to non-compliance provided that when the information arises from a self-audit that person makes a voluntary disclosure to the appropriate agency. In exchange, companies may be required to implement pollution prevention and/or an environmental management system.
States with Audit Privilege and/or Immunity Laws include:
EPA has clearly stated its opposition to statutory and regulatory audit privilege and immunity laws that exist in some states.
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