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:
California
Connecticut
Delaware
Florida
Indiana
Maine
Maryland
Massachusetts
Minnesota
New Mexico
New York
North Carolina
Oregon
Pennsylvania
Tennessee
Vermont
Washington
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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:
Alaska
Arizona
Arkansas
Colorado
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Michigan
Minnesota
Mississippi
Montana
Nebraska
Nevada
New Hampshire
Ohio
Oregon
Rhode Island
South Carolina
South Dakota
Texas
Utah
Virginia
Wyoming
EPA has clearly stated its opposition to statutory and regulatory audit privilege and immunity laws that exist in some states.
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