Environmental Auditing: A Useful Tool That Can Improve Environmental
Performance and Reduce Costs (Chapter Report, 04/03/95, GAO/RCED-95-37).
Pursuant to a congressional request, GAO provided information on the
potential for federal agencies to improve their environmental
performance and reduce costs by conducting environmental audits,
focusing on the: (1) types of programs leading environmental auditing
organizations use; (2) benefits of and extent to which federal agencies
use environmental auditing; and (3) obstacles and disincentives federal
agencies face in environmental auditing.
GAO found that: (1) effective environmental audit programs have strong
support from top management and the resources necessary to hire and
train audit personnel, are independent from external or internal
pressures, and employ quality assurance procedures to ensure accuracy
and thoroughness; (2) private and public organizations with effective
environmental auditing programs have reported improved compliance,
reduced exposure to civil and criminal liability, operational cost
savings, and reduced environmental hazards; (3) most federal agencies do
not conduct environmental auditing programs; (4) although the Bureau of
Land Management and Federal Aviation Administration have implemented
preliminary environmental auditing programs, improvements to these
programs are still needed to fully address these agencies' significant
environmental liabilities; (5) most other federal agencies are beginning
to develop environmental auditing programs; and (6) the obstacles to
further development and implementation of environmental auditing in
federal agencies include the inconsistent application of audit report
and enforcement policies and the lack of commitment from senior agency
management, incentives from federal agencies, and agency technical
expertise.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-95-37
TITLE: Environmental Auditing: A Useful Tool That Can Improve
Environmental Performance and Reduce Costs
DATE: 04/03/95
SUBJECT: Environmental impact statements
Regulatory agencies
Environmental monitoring
Audits
Environmental policies
Toxic substances
Pollution control
Cost control
Federal agencies
IDENTIFIER: James River (VA)
EPA National Priorities List
Air Force Environmental Compliance Assessment and
Management Program
Savannah River (SC)
Superfund Program
EPA National Pollutant Discharge Elimination System
NPDES
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Cover
================================================================ COVER
Report to the Ranking Minority Member, Committee on Governmental
Affairs, U.S. Senate
April 1995
ENVIRONMENTAL AUDITING - A USEFUL
TOOL THAT CAN IMPROVE
ENVIRONMENTAL PERFORMANCE AND
REDUCE COSTS
GAO/RCED-95-37
Environmental Auditing
Abbreviations
=============================================================== ABBREV
ACC - Air Combat Command
BLM - Bureau of Land Management
CERCLA - Comprehensive Environmental Response, Compensation, and
Liability Act of 1980
DOD - Department of Defense
DOE - Department of Energy
DOI - Department of the Interior
DOJ - Department of Justice
DOT - Department of Transportation
EAR - Environmental Auditing Roundtable
ECAMP - Environmental Compliance Assessment and Management Program
EH&S - environmental, health, and safety
EPA - Environmental Protection Agency
FAA - Federal Aviation Administration
FFCA - Federal Facility Compliance Act of 1992
FLPMA - Federal Land Policy and Management Act
FOIA - Freedom of Information Act
GAO - General Accounting Office
NPDES - National Pollutant Discharge Elimination System
NPL - National Priorities List
OEA - Office of Environmental Audit
OECA - Office of Enforcement and Compliance Assurance
OMB - Office of Management and Budget
PCBs - polychlorinated biphenyls
RCRA - Resource Conservation and Recovery Act of 1976
SEC - Securities and Exchange Commission
TSCA - Toxic Substances Control Act of 1976
Letter
=============================================================== LETTER
B-258657
April 3, 1995
The Honorable John Glenn
Ranking Minority Member
Committee on Governmental Affairs
United States Senate
Dear Senator Glenn:
As requested, we are reporting on the potential for federal agencies
to improve their environmental performance and reduce costs by
conducting environmental audits. This report (1) describes the
experience of organizations that are leaders in environmental
auditing and identifies the characteristics that distinguish their
programs, (2) discusses the extent to which federal agencies use
environmental auditing and the benefits that could accrue from its
wider use, and (3) identifies obstacles and disincentives to the more
effective use of environmental auditing by these agencies.
As arranged with your office, unless you publicly announce its
contents earlier, we will make no further distribution of this report
until 30 days after the date of this letter. At that time, we will
send copies to the appropriate congressional committees and to the
Administrator of the Environmental Protection Agency. We will also
make copies available to others on request.
Please contact me at (202) 512-6111 if you or your staff have any
questions. Major contributors to this report are listed in appendix
VII.
Sincerely yours,
Peter F. Guerrero
Director, Environmental
Protection Issues
EXECUTIVE SUMMARY
============================================================ Chapter 0
PURPOSE
---------------------------------------------------------- Chapter 0:1
As the estimated costs of cleaning up contamination on federal lands
rise to hundreds of billions of dollars, environmental auditing is
increasingly viewed as a way to foster better environmental practices
in operating federal facilities. Environmental audits are
comprehensive and systematic reviews of environmental performance
used to improve compliance with environmental laws and minimize
future environmental damage and cleanup costs.
The Ranking Minority Member of the Senate Committee on Governmental
Affairs asked GAO to examine the potential for increasing the use of
environmental auditing in the management of federal agencies'
operations. Specifically, he requested that GAO (1) examine the
experience of organizations that are leaders in environmental
auditing and identify the characteristics that distinguish their
programs, (2) determine the extent to which federal agencies use
environmental auditing and the benefits that could accrue from its
wider use, and (3) identify obstacles and disincentives to the more
effective use of environmental auditing by these agencies.
BACKGROUND
---------------------------------------------------------- Chapter 0:2
During a typical environmental audit, a team of qualified inspectors,
either employees of the organization being audited or contractor
personnel, conducts a comprehensive examination of a plant or other
facility to determine whether it is complying with environmental laws
and regulations. Using checklists and audit protocols and relying on
professional judgment and evaluations of site-specific conditions,
the team systematically verifies compliance with applicable
requirements. The team may also evaluate the effectiveness of
systems in place to manage compliance and assess the environmental
risks associated with the facility's operations.
No laws currently require environmental auditing. Environmental
auditing has been--and remains--largely a voluntary activity.
Companies and public agencies that have adopted the practice have
done so for sound business reasons. The adoption of environmental
auditing by these organizations represents a management decision to
seek compliance proactively, instead of simply reacting to crises.
The Environmental Protection Agency's (EPA) 1986 policy on
environmental auditing encouraged federal agencies subject to
environmental laws to adopt environmental auditing to achieve and
maintain compliance. The agency also acknowledged its own
responsibility to provide technical assistance to help federal
agencies design and initiate audit programs.
RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3
Effective environmental audit programs have a number of
characteristics in common, according to studies GAO reviewed. First
and foremost, the programs have the strong support of their
organization's management, stemming from top management's explicit
commitment to compliance with environmental requirements. They also
receive resources adequate to hire and train audit personnel, to
perform audits of appropriate scope and frequency, and to promptly
fix problems identified through the audit process. In addition,
effective audit programs operate with freedom from internal or
external pressure and employ quality assurance procedures to ensure
the audits' accuracy and thoroughness. Private and public sector
organizations that have effective environmental auditing have
reported benefits that include, in addition to improved compliance,
reduced exposure to civil and criminal liability, cost savings from
operating efficiencies and avoided cleanups, and reduced
environmental hazards.
Even though environmental liabilities are widespread throughout the
federal sector, most agencies--aside from the Department of Energy
(DOE) and the Department of Defense (DOD)--do little or no
environmental auditing. GAO's review of two civilian agencies with
significant environmental liabilities, the Department of the
Interior's (DOI) Bureau of Land Management (BLM) and the Department
of Transportation's (DOT) Federal Aviation Administration (FAA),
showed that both agencies have begun to put in place some of the key
elements of an environmental audit program. Improvements are still
needed, however, to more fully address the agencies' environmental
problems. Information from EPA indicates that most other civilian
federal agencies are either beginning to develop an environmental
audit program or have no program at all.
Obstacles and disincentives impede the further development of
environmental auditing in civilian agencies. In particular, senior
agency management has yet to make the same strong and explicit
commitment to environmental auditing as have the organizations with
effective programs. Civilian agencies may have little incentive to
support environmental auditing as a means of achieving compliance
because EPA and state environmental regulators have performed few, if
any, inspections at many civilian agencies. GAO's work at BLM and
FAA, along with information from EPA, further indicates that
environmental auditing at civilian agencies is hampered because many
agencies lack the necessary environmental expertise. Environmental
auditing is also discouraged by (1) the inconsistent application by
some EPA regions of the agency's policy on requests for audit reports
and (2) current enforcement policies that provide managers with only
vague assurance that taking the initiative to audit for compliance
and correct identified deficiencies will by some measure reduce
penalties.
PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4
ENVIRONMENTAL AUDITING IS
CREDITED WITH SIGNIFICANT
BENEFITS
-------------------------------------------------------- Chapter 0:4.1
Union Carbide, Allied Signal, and other companies contacted by GAO
that previously faced enormous liabilities for pollution indicated
that they currently experience fewer fines, cleanup costs, and legal
problems--a turnabout they attribute chiefly to environmental
auditing. One company official noted that "even the most hardline
managers are beginning to recognize [environmental auditing's] value
when they are presented with the . . . cost of remediation,
permitting, and enforcement actions." DOE and Air Force officials
were similarly supportive, citing a number of examples of significant
cost savings and other benefits. DOE claimed, for example, that
engineering studies at its Savannah River nuclear facility, spurred
by an environmental audit, resulted in a decision to consolidate 14
separate water systems at a savings of over $120 million dollars.
Air Force engineers estimated, conservatively, that environmental
audits save one service command over $4.3 million yearly in fines and
penalties, although Air Force lawyers believe the savings to be much
higher. Notwithstanding such anecdotal accounts, however, GAO found
that systematic and comprehensive data on the savings realized
through environmental audits are not available.
Representatives of organizations using environmental auditing
emphasized the importance of top management's commitment to a
program's success. A formal environmental policy statement is often
used by top managers to put employees, shareholders, and others on
notice that environmental protection is integral to the
organization's mission. In addition, some organizations consider
environmental performance in compensation decisions for key
personnel. Union Carbide officials, for example, told GAO that a
facility manager's pay can be reduced if the facility's environmental
performance is rated poorly. They added that the "surest way for a
plant manager to be fired is to fail to follow up on an audit's
findings by implementing appropriate corrective actions."
ENVIRONMENTAL AUDITING AMONG
FEDERAL AGENCIES IS LIMITED
-------------------------------------------------------- Chapter 0:4.2
While DOE and DOD have made significant progress toward developing
effective environmental audit programs, many other federal agencies,
some with potentially large environmental liabilities, have made more
limited progress. GAO's review of BLM and FAA showed that although
these agencies have developed pilot audit programs, they still need
to expand these programs and ensure that the programs become
permanent. Information from EPA indicates that other federal
agencies also have only fledgling audit programs or no programs at
all. For example, a 1993 EPA survey of agency environmental
officials disclosed that 8 of 19 agencies surveyed have no
environmental audit program and that many of the remaining agencies'
programs were, at best, rudimentary.
As the private sector's experience has shown, environmental audit
programs can increase compliance with environmental laws and help
avoid the costs of noncompliance. Furthermore, while the
environmental audit programs at BLM and FAA are still under
development, their pilot audits have already realized financial and
environmental benefits. For example, an audit at FAA's Technical
Center in New Jersey revealed that oil left outdoors in open
containers for fire extinguisher training was overflowing and
contaminating the ground when it rained. The audit manager stated
that if the audit had not discovered the oil spillage and simple,
low-cost measures had not been taken to correct it, the Center could
have had to spend additional dollars investigating the contamination
before the actual cleanup could even begin. He added that if the
Center's audit program had been implemented in the 1960s, current
cleanup costs, estimated at $25 million to $30 million, could have
been avoided.
AGENCIES FACE OBSTACLES IN
DEVELOPING ENVIRONMENTAL
AUDIT PROGRAMS
-------------------------------------------------------- Chapter 0:4.3
While some civilian federal agencies, such as BLM and FAA, have
launched pilot environmental audit programs, obstacles impede the
further development of environmental auditing in the civilian sector.
According to environmental audit experts GAO interviewed, building
strong environmental audit programs requires that senior managers
take actions such as issuing statements notifying personnel of
management's support for the program, providing adequate and reliable
funding for the program, personally reviewing audit reports, and
ensuring that environmental audit findings are promptly addressed.
Senior managers at most civilian agencies have yet to take such
steps.
Civilian agency managers may have little incentive to support
environmental auditing because, under the current EPA and state
inspection strategy, many civilian agencies have little risk of being
inspected. BLM and FAA environmental officials explained that
relatively few of their agencies' facilities have ever been inspected
and that, as a result, agency managers see little need to use
environmental auditing to ensure compliance. EPA data show that a
large portion of the civilian facilities inspected by federal and
state inspectors in fiscal year 1994 belonged to a few civilian
agencies, while few, if any, facilities belonging to other civilian
agencies with substantial environmental liabilities were inspected.
Another obstacle to the wider use of environmental auditing by
civilian agencies is that many lack the necessary technical
expertise. EPA has recently taken steps to address civilian
agencies' needs for environmental expertise, but GAO's work at BLM
and FAA and information from EPA itself indicate that more sustained
and regular technical assistance will be required. In particular,
effectively encouraging environmental auditing in civilian agencies
will require outreach to senior civilian agency managers on how
environmental auditing can improve compliance with environmental
laws, reduce exposure to environmental liabilities, and lower costs.
Opportunities exist for EPA to deliver the needed technical
assistance at low cost through cooperative efforts with experienced
agencies, such as DOE and the Air Force, which have already developed
environmental audit training programs and have demonstrated a
willingness to share them with other agencies.
Another disincentive to environmental auditing results from EPA's
treatment of environmental audits in enforcement actions against the
sponsoring organization. To avoid discouraging the voluntary
adoption of environmental auditing, EPA's 1986 policy statement notes
that the agency "will not routinely request audit reports." However,
members of the audit community explain that the inconsistent
application of this policy by some EPA regional enforcement
authorities has had a "chilling effect" that has impeded
environmental auditing in both public and private organizations.
Environmental officials report that an additional disincentive to
auditing is created by EPA policies that encourage environmental
auditing and the disclosure of violations but do little to assure
regulated entities that such proactive behavior will be rewarded with
any relief from penalties.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5
GAO recommends that the Administrator, EPA, (1) ensure that civilian
federal agencies receive a measure of enforcement attention
commensurate with the environmental risks posed by their operations,
(2) use technical assistance and outreach to civilian federal
agencies to improve agency managers' awareness and understanding of
the benefits to be gained from environmental auditing, (3) require
EPA regional offices to adhere to the agency's stated policy that EPA
will not "routinely request" environmental audit reports but will
confine such requests to the exceptional situations outlined in the
agency's 1986 policy statement on environmental auditing, (4) revise
agency policies to encourage regulated entities to self-discover,
report, and correct noncompliance by providing for reductions in the
penalties for violations identified through environmental auditing.
AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:6
EPA, DOE, DOD/Air Force, and DOT/FAA provided written comments on a
draft of this report, which are included in their entirety in
appendixes III through VI of this report. EPA agreed generally with
GAO's recommendations that it inspect civilian federal agencies and
provide technical assistance to these agencies to encourage wider use
of environmental auditing, but it questioned whether the report had
(1) shown persuasively that there have been significant departures
from its stated policy of not requesting copies of audit reports
except under limited circumstances and (2) adequately demonstrated
the need to change its audit policy to provide more explicit
assurance that penalties would be mitigated for violations that were
discovered, reported, and corrected as a result of voluntarily
conducted audits. Citing the common belief among regulated companies
and agencies that these issues do, in fact, discourage the wider use
of voluntary environmental audits, GAO still maintains that the
recommended actions are needed. EPA's comments and GAO's detailed
responses are included in appendix III.
DOE, DOD/Air Force, and DOT/FAA agreed generally with GAO's findings
and recommendations. They also provided information to supplement,
clarify, and update points discussed in our draft report. Where
appropriate, such information has been incorporated in the final
report. DOI/BLM reviewed the draft but declined to provide written
comments. The DOI Assistant Secretary for Land and Minerals
Management stated that BLM would give the report's findings and
recommendations careful consideration as the agency proceeds with the
development of its environmental audit program.
INTRODUCTION
============================================================ Chapter 1
Starting in the late 1970s, a number of companies began to
systematically evaluate their compliance with environmental
requirements and assess the potential liabilities they faced as a
result of noncompliance and the environmental damage caused by their
operations. In some instances, these "environmental audits" were
mandated by regulatory authorities. In other cases, they were
undertaken voluntarily by corporate managers wanting to identify
compliance problems and to avoid the associated fines, penalties,
lawsuits, and criminal liability.
The practice of environmental auditing continued to develop and
spread throughout the 1980s, partly because of the visibility and
encouragement given to it by the Environmental Protection Agency
(EPA), which viewed environmental auditing as a useful adjunct to
traditional regulatory enforcement. Perhaps more importantly, the
practice grew as top business managers increasingly recognized that
compliance was too important to be left to chance. Increasingly,
corporate managers came to view environmental auditing (1) as a
powerful tool for monitoring and proactively managing compliance as
well as overall environmental performance and (2) as a means of
controlling the risks inherent in failing to meet legal requirements.
A TOOL FOR ENSURING COMPLIANCE
---------------------------------------------------------- Chapter 1:1
While there is no single, universally recognized definition of
environmental auditing, there is broad consensus on what
environmental auditing consists of and what it seeks to accomplish.
EPA has defined environmental auditing as a systematic, documented,
periodic, and objective review by regulated entities of facility
operations and practices related to meeting environmental
requirements.\1 The agency notes that environmental audits can be
designed to achieve a number of objectives, including verifying
compliance with environmental laws and regulations, evaluating the
effectiveness of systems already in place to manage environmental
responsibilities, and assessing the risks from regulated and
unregulated materials and practices employed in facilities'
operations.
While the term environmental auditing, used in its broadest sense,
can encompass a variety of evaluation methods and subjects, this
report is concerned solely with the ongoing, periodic, and systematic
evaluations of an organization's environmental performance conveyed
in the definition adopted by EPA and other key organizations. Such
environmental audits rely primarily on specific criteria, such as
laws, regulations, and organizational policies relating to
environmental protection. While these audits may also use as
criteria standards and principles adopted by industry organizations
and "best practices" identified through benchmarking and other
studies, their hallmark is reliance on objective facts measured
against some commonly recognized standard.
An effective and comprehensive environmental management program, as
distinguished from a discrete environmental audit conducted at a
particular facility, cannot be achieved overnight. It must be
developed gradually and systematically over time, with the hiring
and/or training of environmental personnel (including qualified
environmental auditors), the building of basic environmental
management systems and expertise, and the fostering of environmental
awareness and sensitivity among the organization's members.
--------------------
\1 The International Chamber of Commerce and the Environmental
Auditing Roundtable, a membership organization dedicated to
furthering the development and professional practice of environmental
auditing, have adopted definitions that closely resemble EPA's.
IMPETUS FOR ENVIRONMENTAL
AUDITING
---------------------------------------------------------- Chapter 1:2
Environmental auditing emerged as a compliance management tool in the
late 1970s, at a time of rapidly expanding environmental regulation
and a number of highly publicized incidents of environmental
pollution. Among the more significant environmental laws enacted
during this period was the Resource Conservation and Recovery Act of
1976 (RCRA), which regulates hazardous wastes from their generation
to their disposal and provides for cleanups at active facilities.
Among the more notorious pollution incidents of the period was the
1975 contamination of the James River by the toxic chemical Kepone,
resulting from activities at an Allied Chemical facility in Virginia.
This and similar pollution incidents forcefully brought home to
corporate managers the potential liability that unknown and
unassessed compliance problems posed for their companies and for them
personally.
The development of environmental auditing as a tool to assess and
manage compliance was further spurred by actions of the Securities
and Exchange Commission (SEC), which in the early 1970s began to
require companies to disclose significant costs of complying with
environmental standards. Beginning in 1977, SEC also required
several large U.S. companies, including Allied Chemical, to
undertake corporatewide audits to determine the true extent of the
environmental liabilities they faced. The Commission believed,
essentially, that these companies were understating their potential
pollution-related liabilities in their annual financial statements
and reports to stockholders. After complying with the SEC orders to
audit their potential environmental liabilities, each of these
companies established programs to conduct environmental audits on a
regular basis.
Interest in environmental auditing received an additional boost in
the early 1980s from the passage of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (CERCLA), which
governs cleanups of hazardous waste sites. Liability for cleanups
under CERCLA, coupled with heavy penalties for violations of RCRA
rules and RCRA's requirements for corrective actions, caused many
corporate officers to attach much greater importance to environmental
compliance. To better ensure compliance and avoid potentially
staggering costs, many companies decided to implement environmental
audit programs. Because of the nature of their business and the
environmental risks involved, major chemical-intensive companies were
in the vanguard of this movement.
However, notwithstanding SEC and EPA settlements and orders mandating
environmental auditing under particular circumstances, there has
never been a general requirement for regulated entities to conduct
environmental auditing. Environmental auditing has been--and
remains--largely a voluntary activity. For the most part, companies
and public agencies that have adopted environmental auditing have
done so by choice, for sound business management reasons. Given the
increasing complexity of environmental regulations and the
potentially high cost of noncompliance, the top managers of these
organizations have embraced environmental auditing as a means of
identifying and correcting violations before they are discovered by
others or develop into costlier liabilities. The adoption of
environmental auditing by these organizations represents a management
decision to seek compliance proactively, instead of simply reacting
to crises. As one corporate legal officer commented in a survey
conducted by the National Law Journal,
"[e]nvironmental compliance is a legal, and is becoming a moral,
necessity. Therefore, attention must be given first to
correcting the most obvious deficiencies, second to being
proactive and flushing out the latest deficiencies, and third to
being proactive and, in a cost-effective manner, anticipating
the next arena for regulation."
As most organizations have gained experience with compliance auditing
and have sought to identify the root causes of problems discovered
during their audits, they have expanded their programs to include an
evaluation of their environmental management systems and an
assessment of risks from materials and practices employed in their
operations. These organizations have found that weaknesses in
environmental management systems (e.g., inadequate policy guidance,
employee training, and accountability) most commonly explain
compliance problems, particularly recurrent problems.
EARLY EFFORTS TO PROMOTE
ENVIRONMENTAL AUDITING
---------------------------------------------------------- Chapter 1:3
During the late 1970s, EPA's regulatory reform staff became attracted
to environmental auditing as an innovative approach to help ensure
compliance and a useful complement to traditional regulatory
policing. Through contracted and internal studies, EPA gave
heightened visibility to environmental auditing and fostered
increased interest in it on the part of the regulated community,
particularly private sector industrial firms. Starting in 1981, some
of the most committed industrial practitioners of environmental
auditing began to meet periodically to compare their auditing
approaches and exchange experiences in achieving the goals of their
voluntary self-assessment programs. This group, which early on began
to admit EPA representatives to its meetings, constituted the nucleus
of what came to be called the Environmental Auditing Roundtable
(EAR). EAR was soon joined by other organizations that shared its
objectives of advancing the practice of environmental auditing and
developing standards for the conduct of environmental audits.
Beginning in 1983, EPA undertook a number of initiatives to encourage
environmental auditing and generate information on the manner and
extent of its use. EPA endorsed auditing at workshops and
conferences, analyzed the attributes and benefits of effective
private sector audit programs, and provided information and technical
assistance to those interested in pursuing specific audit approaches.
In 1984, the agency published the results of a major study entitled
Current Practices in Environmental Auditing. This document provided
an overview of the then-current state of the art and characterized in
detail the audit programs of five industry pioneers in the field. In
the same year, EPA sponsored a conference for federal agencies to
emphasize that federal managers also need to know the actual and
potential environmental problems associated with their facilities'
operations. Environmental auditing, the agency noted, could be an
invaluable tool for obtaining this knowledge.
In July 1986, EPA issued a policy statement on environmental
auditing, which remains in effect. This policy statement
encourages regulated entities to develop, implement and upgrade
environmental audit programs;
explains how EPA's inspection and enforcement activities may
respond to regulated entities' efforts to ensure compliance
through auditing;
discusses circumstances under which EPA may request audit reports,
in whole or in part;
endorses environmental auditing at federal facilities; and
outlines elements of effective audit programs as revealed by EPA's
examination of mature and successful programs in the private
sector.
In response to comments received on an earlier interim policy
statement, EPA stressed that it was encouraging rather than mandating
environmental auditing. It noted that "[b]ecause environmental
auditing systems have been widely adopted on a voluntary basis in the
past and because audit quality depends to a large degree upon genuine
management commitment to the program and its objectives, auditing
should remain a voluntary program." While the agency had considered
requiring regulated entities to establish environmental audit
programs, it was persuaded by comments from industry and by its own
research that such an approach would discourage rather than encourage
initiative and innovation in environmental auditing and would lead to
audit programs that emphasized form over substance.
In March 1988, EPA sponsored a second conference on environmental
auditing, specifically for federal agencies. At the conference the
agency distributed to participants a document intended to serve as a
ready reference source for those interested in acquiring further
training in or information about environmental auditing. This was
followed in August 1988 by the publication of a technical assistance
document entitled Environmental Program Design Guidelines for Federal
Agencies. In August 1989, EPA provided further technical assistance
in the form of a Generic Protocol for Environmental Audits at Federal
Facilities.
LITTLE PROGRESS MADE IN
PROMOTING ENVIRONMENTAL
AUDITING AMONG FEDERAL
AGENCIES
-------------------------------------------------------- Chapter 1:3.1
Executive Order 12088, issued in October 1978, directs federal
agencies to comply with applicable environmental laws and regulations
in the same manner as other regulated entities. Consistent with this
order, EPA's 1986 policy statement on environmental auditing
encouraged all federal agencies subject to environmental laws and
regulations to institute audit programs to help ensure the adequacy
of internal systems to achieve, maintain, and monitor compliance.
The agency also acknowledged its own responsibility in this area,
noting that to the extent feasible, it would provide technical
assistance to help federal agencies design and initiate audit
programs.
Notwithstanding EPA's policy statement, a 1987 EPA-sponsored survey
suggested that the federal sector had a long way to go in developing
effective environmental audit programs. As reported by EPA, only 9
out of the 36 federal agencies or organizational units surveyed at
that time had implemented fairly comprehensive environmental audit
programs. A number of these--in particular, the Department of Energy
(DOE) and certain Department of Defense (DOD) agencies--had done so
in response to serious environmental problems caused by their past
and current operations and the adverse publicity and criticism these
problems had generated. For the remainder of the federal sector,
little progress had been made in implementing environmental auditing.
Moreover, as discussed in chapter 3, this situation is little changed
today, as shown by EPA's most recent (1993) survey of federal
agencies' environmental compliance programs.
In recent months, EPA has taken several initiatives to promote the
greater use of environmental auditing by federal agencies. Since
mid-1994, it has chaired an interagency work group responsible for
revising and updating a complete set of multimedia environmental
audit protocols for federal facilities. It is also updating the
Environmental Audit Program Design Guidelines for Federal Agencies,
first issued in 1988. Finally, it cosponsored, with DOE, a 4-day
environmental audit training conference for federal agencies, held in
March 1995.
OBJECTIVES, SCOPE, AND
METHODOLOGY
---------------------------------------------------------- Chapter 1:4
On July 30, 1993, the Ranking Minority Member of the Senate Committee
on Governmental Affairs requested that we examine the potential for
increasing the federal government's use of environmental auditing as
a means of improving federal agencies' environmental performance and
realizing cost savings. On the basis of subsequent discussions with
the Ranking Minority Member's staff, we agreed to
examine the experience of organizations that are leaders in
environmental auditing and identify the characteristics that
distinguish their programs;
determine the extent to which federal agencies use environmental
auditing and the benefits that could accrue from its wider use;
and
identify obstacles and disincentives to the more effective use of
environmental auditing by these agencies.
To address the first objective, we reviewed the literature on
environmental auditing; interviewed EPA officials who have been
involved in the agency's efforts to study and promote environmental
auditing; consulted with recognized private sector experts on the
subject, including audit consulting firms and audit practitioners;
and interviewed individuals in charge of the environmental audit
programs of a number of corporations acknowledged to be leaders in
the field. We also interviewed officials of the Department of Energy
and the Department of the Air Force, agencies that our research
revealed to be recognized leaders in environmental auditing in the
public sector. (See app. I for a listing of the companies and other
organizations we consulted.)
To address the second and third objectives, we reviewed studies of
federal agencies' environmental compliance programs prepared for EPA,
reviewed prior GAO reports as well as reports issued by agencies'
Inspectors General, the Congressional Research Service, the
Congressional Budget Office, and others. We also interviewed EPA
officials, including officials in the agency's Office of Enforcement
and Compliance Assurance, and attended meetings and reviewed
proceedings of the Civilian Federal Agency Task Force sponsored by
EPA.
To determine what benefits federal agencies could gain by
implementing environmental audit programs and to identify possible
obstacles to the wider use of auditing by these agencies, we examined
the relevant experience of private sector organizations that have
made a strong commitment to environmental auditing and compliance.
We also examined the environmental audit programs of DOE and the
Department of the Air Force, which in recent years have taken
significant steps to improve their environmental performance.
In addition, to obtain detailed insights into both the nature of
civilian federal agencies' environmental audit programs and the
barriers impeding their development, we examined in depth the
activities undertaken to ensure compliance by two agencies: the
Department of the Interior's (DOI) Bureau of Land Management (BLM)
and the Department of Transportation's (DOT) Federal Aviation
Administration (FAA). We selected these agencies on the basis of
information obtained from a number of sources, including (1) EPA's
Federal Facilities Compliance Docket, which lists all potentially
contaminated facilities reported by agencies or other sources for
possible inclusion on the National Priorities List, EPA's register of
the nation's most contaminated sites, (2) reports of congressional
hearings on environmental problems faced by civilian federal
agencies, and (3) published reports of environmental liabilities
resulting from the past and current operations of federal agencies.
We sought, in making our selection, to include agencies that varied
in size and in the nature of their activities and whose operations
could have significant adverse effects on the environment.
We conducted our work between July 1993 and February 1995 in
accordance with generally accepted government auditing standards.
EFFECTIVE ENVIRONMENTAL AUDIT
PROGRAMS HAVE BENEFITS AND
DISTINGUISHING CHARACTERISTICS
============================================================ Chapter 2
Organizations that monitor and actively manage environmental
compliance do so as much to protect their own interests as to protect
the environment. Chief among the benefits they seek from
environmental auditing are the detection of compliance problems
before these problems pose serious liabilities, cost savings through
operating efficiencies, and reduced risks from environmental hazards.
Studies have shown that effective environmental audit programs have a
number of characteristics in common. First and foremost, they have
the strong support of their organization's management, stemming from
top management's explicit commitment to environmental protection and
full compliance with environmental requirements. They also receive
resources adequate to staff and operate the programs properly, to
hire and train audit and other necessary personnel, to perform audits
of appropriate scope and frequency, and to promptly fix problems
identified through the audit process. Successful audit programs also
operate with independence, objectivity, and freedom from internal or
external pressure or conflict of interest. Finally, to ensure the
accuracy and thoroughness of the audits and the integrity of the
audit process, effective audit programs are subject to quality
assurance procedures.
ENVIRONMENTAL AUDITING HAS
PROVEN BENEFITS
---------------------------------------------------------- Chapter 2:1
EPA-sponsored research and our own discussions with private and
public practitioners of environmental auditing show that
organizations that adopt environmental auditing typically do so
because they believe it makes good business sense--helping to
maintain or improve their long-term competitive status and viability.
More specifically, the benefits of environmental auditing include
improved compliance and a corresponding reduction in exposure to
legal actions, fines, penalties, and criminal prosecution; cost
savings and operating efficiencies; fewer environmental hazards and
reports of incidents/accidents and improvements in workers' health
and safety; and a positive perception by regulators, employees,
stockholders, and the public.
ENVIRONMENTAL AUDITING HELPS
TO ENSURE COMPLIANCE
-------------------------------------------------------- Chapter 2:1.1
Noncompliance with environmental laws and regulations can entail
heavy costs for regulated entities, including fines, penalties, tort
liabilities, and even criminal sanctions for responsible officials.
As one corporate environmental officer noted at a March 1994
conference on environmental management, there is substantial
precedent indicating that corporate officers can be held liable for
the conduct of subordinate employees. Moreover, he noted, a growing
number of judicial decisions indicate that any purposeful failure to
investigate criminal activity or deliberate ignorance thereof also
constitutes criminal liability. The result, we found, is that most
environmental audit programs have been established at the direction
of top management to identify and document the compliance status of
the company's facilities and to provide management with assurance
that the organization's potential exposure to regulatory compliance
problems is being effectively limited.
A manager of Allied Signal's environmental audit program told us that
the company's program serves to overcome top management's inevitable
insulation from day-to-day operating practices at the facility level,
including practices related to environmental compliance. He noted
that top management gets the "straight story [on a facility's
compliance status] from trusted people who have no ax to grind."
Information developed by the audits permits managers to judge the
adequacy of the environmental management systems and the personnel
put in place to ensure compliance and make decisions to influence the
behavior of the system. Moreover, he noted, the direct involvement
of top management in environmental protection, through the audit
program, stimulates lower-level management, particularly facility
managers, to get involved also, so that environmental considerations
receive attention at all levels of the company.
Studies of corporate environmental audit programs commissioned by EPA
in the early 1980s show how corporate management uses environmental
audit programs to assess and improve operating facilities'
compliance. As one such study reported, at a facility for
manufacturing scientific instruments, the company's environmental
audit team found that wastewater was being discharged to the storm
sewer rather than the sanitary sewer. The team made this discovery
while reviewing the plant's sewer diagrams and physically observing
discharge points. Following the audit, the manufacturer took steps
to obtain approval from the local publicly owned wastewater treatment
works to include this waste stream in the plant's sanitary discharge.
Within 2 months, the necessary approvals and changes were made. The
audit benefited the company by identifying and correcting an instance
of noncompliance before it became a costly liability and benefited
the environment by causing the wastewater discharge to be rerouted to
the sanitary sewer.
ENVIRONMENTAL AUDITING CAN
LOWER COSTS
-------------------------------------------------------- Chapter 2:1.2
EPA's research and our own work show that organizations that practice
environmental auditing can save money by improving compliance and
enhancing environmental performance. To the extent that improved
compliance results in fewer and less serious findings of rule
violations, these organizations can expect to spend less for fines,
penalties, and lawsuits over time. Also, to the extent that improved
compliance and performance reduce pollution, these organizations can
lower the long-term costs of environmental cleanup and remediation.
Exact data on these categories of cost savings are often not readily
available. Most private sector organizations report that they do not
systematically track regulatory fines and penalties to identify
patterns or trends, and even those that could provide such
information are generally reluctant to do so. With regard to savings
on future cleanups, the organizations we contacted also told us that
it is virtually impossible to quantify the costs avoided in the
future through improvements in environmental compliance and
performance today.
To recognize the difficulty of estimating these kinds of savings,
however, is not to deny their reality. A senior vice president in
charge of one company's environmental compliance program noted, for
example, that the costs avoided through environmental auditing "may
be `soft dollars,' but even the most hardline managers are beginning
to recognize [auditing's] value when they are presented with the
`hard dollars' cost of remediation, permitting, and enforcement
actions." Similarly, a manager of DOE's environmental audit program,
while acknowledging the difficulty of quantifying many of the savings
resulting from environmental auditing, confidently predicted that
auditing would help the agency avoid in the future the multibillion
dollar cleanup costs that its past operations have imposed on it to
date.
Some officials, nonetheless, did provide us with at least an
indication of the cost savings potential of environmental auditing.
For example, officials in charge of the Environmental Compliance
Assessment and Management Program (ECAMP) for the Air Force's Air
Combat Command told us that they have seen a substantial reduction in
fines and penalties, attributable, in their view, to the
effectiveness of their audit program in discovering and correcting
compliance deficiencies before they are discovered by others. They
said that Air Force engineers estimated, conservatively, that
environmental audits save the Command about $4.3 million yearly in
fines and penalties. Air Force lawyers, they added, believe that the
amount in avoided fines and penalties might be much higher, perhaps
as much as $100 million annually.
The following examples illustrate cost savings achieved through
environmental audit programs:
Through an audit of drinking water systems at its Savannah River
nuclear facility, DOE found that the facility's plant for
treating surface water to produce potable water failed to comply
with state drinking water regulations. This finding initially
pointed to the need to upgrade the facility's numerous
groundwater-based systems at an estimated cost of $156 million.
Further engineering studies spurred by this high cost estimate
subsequently resulted in a decision to consolidate 14 separate
systems, reducing the estimated cost to $32 million--a savings
of over $120 million.
During an audit of a facility that polishes and grinds glass
lenses, a company's environmental audit team determined that the
plant was disposing of all of its glass sludge as hazardous
waste because the sludge contained residue from leaded glass.
Further investigation through the audit revealed that less than
30 percent of the residue came from leaded glass waste streams;
the balance did not qualify as hazardous waste. As a result,
the plant began segregating the residue into separate waste
streams, testing to verify that lead existed only in those waste
streams originating from the leaded glass grinding operations,
and disposing of the nonhazardous waste, at a much lower cost,
in a sanitary landfill. According to the company's
environmental audit manager, these changes in procedure led to
substantial yearly cost savings.
Furthermore, environmental auditing is only one component of a
comprehensive system for managing environmental performance, and it
is not the only component that can produce savings. We found that
organizations with highly developed environmental performance
management programs typically have other programs that also generate
savings. These may include pollution prevention, waste minimization,
recycling, and energy and materials conservation programs. The
environmental audit program is often the catalyst for establishing
these programs and can be adapted to evaluate their operational
effectiveness--just as it evaluates compliance, environmental
management systems, and regulated and unregulated risks.
Illustrating the economic benefits of a proactive approach to
managing environmental performance, the manager of DuPont's
environmental effectiveness program stated that his company's
analysis shows that, on average, voluntary waste reduction measures
cost one-third as much as measures required by regulatory
agencies--for the same environmental benefit. In fact, he added,
there is a high probability that the cost of voluntary efforts can be
as little as one-tenth that of regulatory-driven measures.
ENVIRONMENTAL AUDITING CAN
REDUCE ENVIRONMENTAL HAZARDS
-------------------------------------------------------- Chapter 2:1.3
While our work showed that environmental audits typically focus on
compliance with regulatory requirements and on the functioning of
environmental management systems established to ensure compliance, it
also showed that a number of organizations use audits to identify and
assess the potential environmental risks posed by the practices,
procedures, and materials routinely employed in a facility's
operations. Such practices, procedures, and materials may already be
subject to some regulation, or they may currently be unregulated. In
either case, they may pose inherent environmental, health, and safety
hazards that the organization may wish to reduce or eliminate. This
goal might be accomplished by introducing changes in processes and
procedures or by substituting less environmentally hazardous
materials for those currently used in operations and maintenance.
For organizations that have never previously assessed the risks posed
by their operations in a systematic way, the potential for reducing
risks through auditing may be great.
In a case reported by EPA, a member of a company's environmental
audit team was assigned to cover a plant's program for controlling
PCBs (polychlorinated biphenyls--chemicals commonly used as
insulating material in electrical equipment). Following the audit
protocol, the auditor reviewed documentation on controlling PCBs and
physically inspected each of the site's transformers containing PCBs.
During the inspection, he noticed that one large transformer was
located in an area where forklifts and other vehicles frequently
passed. Although the transformer appeared to meet all regulatory
requirements, he realized that its location constituted an inherent
hazard because a vehicle could collide with it. The facility manager
agreed with this assessment and took steps to move the transformer to
a more secure area. Through this action, the company not only
eliminated a hazard to health, safety, and the environment but also
avoided a potential liability.
Xerox environmental officials told us that their company has
emphasized the identification and elimination of potential hazards as
part of its total quality environmental management program. In 1985,
the company began environmental assessments at all company locations.
The worst potential outcome of any hazard was assumed. Unacceptable
risks were eliminated, the storage of chemicals was minimized, and
hazardous chemicals were eliminated from processes wherever possible.
At one Xerox facility, a large store of arsenic and selenium was
discovered near warehouses that contained food and pharmaceuticals.
The storage site was moved to another area and the volume of
chemicals judged acceptable at any one location was greatly reduced.
At another Xerox facility situated near a nursing home, the number of
stored tanks of chlorine was first reduced; then the tanks were
removed; and finally chlorine was eliminated altogether from the
manufacturing process.
ENVIRONMENTAL AUDITING CAN
HAVE OTHER BENEFITS
-------------------------------------------------------- Chapter 2:1.4
In addition to the primary benefits of environmental auditing
discussed above, a number of other benefits were cited by the
authorities we consulted.
Environmental auditing can increase environmental awareness and
capability among employees. As EPA and corporate leaders in
environmental auditing have reported, an important benefit of
auditing is that it raises the general level of environmental
awareness within an organization and helps employees at all
levels better understand their responsibilities in protecting
the environment. According to company officials we interviewed
and pertinent literature we reviewed, the act of establishing an
environmental audit program signals to the organization that top
management attaches importance to meeting environmental
requirements and conducting the organization's operations in an
environmentally responsible way.
Environmental auditing can result in relaxed regulatory scrutiny.
Many corporate environmental and legal officers told us that
having a credible environmental audit program can positively
influence regulators' confidence in the intention and ability of
a company to conduct its business in an environmentally
responsible manner. One consequence, they note, is that
regulators tend to direct limited inspection resources to other
companies perceived as posing greater risks to the environment.
Environmental auditing establishes a record of a company's
environmental performance. Increasingly, organizations are
under pressure to disclose information to the public about their
environmental performance and about the environmental, health,
and safety hazards posed by their operations. Practitioners and
advocates of environmental auditing note that it provides a
basis for organizations to responsibly report to their
stakeholders (employees, investors, regulators, neighbors in the
community, and the general public) on their environmental
compliance and liabilities and on the measures they are taking
to improve their environmental performance.
Environmental auditing facilitates planning and budgeting for
environmental projects. A comprehensive environmental audit
provides valuable information about the nature and extent of an
organization's environmental problems, allowing managers to set
priorities and to plan and budget for necessary corrective
actions. Officials in the Air Force's environmental program
told us that the audit program's ability to help identify the
service's environmental liabilities and build a data base of
environmental requirements was a big selling point for the
program and a benefit borne out by experience. DOE officials
concurred with this assessment, telling us that environmental
auditing helped the agency to incorporate environmental needs
into the long-range budget process.
EFFECTIVE ENVIRONMENTAL AUDIT
PROGRAMS HAVE COMMON
CHARACTERISTICS
---------------------------------------------------------- Chapter 2:2
In its 1986 policy statement on environmental auditing, EPA included
a list of what it saw as the basic elements of an effective
environmental audit program. The list included such factors as top
management's explicit support and commitment to follow up on an
audit's findings; adequate resources for the audit program, including
appropriate staffing and training; the audit program's independence
from the functions and facilities audited; and quality assurance
measures to ensure the integrity of the audit process and the
accuracy and thoroughness of the audits. The list also included
elements more intrinsic to audits themselves, such as a clear
definition of the audit's objectives and scope; a process through
which enough information is collected, analyzed, interpreted and
documented to achieve the audit's objectives; and a process through
which reports of the audit's findings are promptly prepared. Lists
very similar to EPA's can be found in basic texts on environmental
auditing and in literature prepared by such organizations as the
International Chamber of Commerce, the Environmental Auditing
Roundtable, and environmental management consulting firms such as
Arthur D. Little, Inc.
TOP MANAGEMENT'S COMMITMENT
IS A PREREQUISITE
-------------------------------------------------------- Chapter 2:2.1
The prime determinant of an effective environmental audit program is
a strong commitment by management to comply with environmental
requirements. Without such a commitment, we were told, adequate
resources will not be provided to support and sustain an effective
audit program, to hire and train competent auditors and audit
managers, to conduct audits of sufficient scope and frequency, and,
most importantly, to ensure that audit recommendations are promptly
followed up with appropriate corrective actions. We also heard
repeatedly that without clear indications of top management's
commitment and support, managers at lower levels will not perceive
environmental compliance and protection as organizational priorities
and will not view them as integral to their job responsibilities or
essential to evaluations of their performance.
The manager of Allied Signal's audit program echoed the opinion of
many others in saying that the support of top management is key to
the success of any program because the rest of the organization takes
its cues from management and supports the things that it perceives
management cares about. He added that an absence of commitment and
support from top management would constitute a virtually
insurmountable obstacle to building an effective environmental audit
program.
Our review showed that top management's support for the goal of
environmental protection, and for environmental auditing as one of
the tools for achieving that goal, can be communicated and
demonstrated in a number of ways. A formal environmental policy
statement is one of the means most frequently employed by top
managers to put employees and other stakeholders on notice that they
view environmental protection as integral to the organization's
mission. Explicit support of environmental policy in annual reports,
shareholder meetings, and management meetings is another. Other
methods include (1) visibly placing environmental functions,
including the environmental audit function, in the organizational
structure and (2) considering environmental performance in
compensation decisions for key personnel, such as facility managers.
DuPont has adopted a policy on safety, health, and the environment
that specifically commits the corporation, among other things, to (1)
comply with all laws and regulations applicable to safety, health,
and environmental quality in its manufacturing, product development,
marketing, and distribution activities and (2) routinely review its
operations for the purpose of making safety, health, and
environmental quality improvements beyond those legally required when
such changes will provide significant benefits at reasonable cost.
Managers in DuPont's environmental audit program told us that top
management's commitment to environmental goals is further underscored
by the fact that the company's Chairman/Chief Executive Officer also
serves as its Chief Environmental Officer. This individual has
articulated as a goal for DuPont that "every employee be able to
recognize an unsound environmental practice and correct it or call it
to the attention of those who will."
Union Carbide--which has, since the Bhopal disaster of December 1984,
committed itself to having a compliance assurance and risk management
system "second to none"--has tried to create a corporate culture that
accepts nothing less than full compliance with environmental laws and
regulations and with corporate environmental standards that are often
more stringent. On the theory that "what gets measured gets done,"
Union Carbide has built environmental performance into its employee
review system. Environmental audits, which are viewed as setting a
tone of compliance in the company, are the primary means for
measuring this performance. Company officials told us that if the
environmental performance of a Union Carbide facility is rated as
poor, the compensation of the facility's manager can be reduced. If
the performance is very bad, the manager can lose his or her job.
The surest way for a plant manager to be fired, we were told, is to
fail to follow up on an audit's findings by implementing appropriate
corrective actions.
RESOURCES ARE ADEQUATE TO
SUPPORT ENVIRONMENTAL
COMPLIANCE
-------------------------------------------------------- Chapter 2:2.2
While it is important for top management to communicate its
commitment to environmental goals as a way of fostering a climate of
compliance within an organization, managers of leading environmental
audit programs told us that tangible support is also
needed--resources sufficient for the program to operate effectively,
for appropriate corrective actions to be implemented, and for the
organization to be convinced of the seriousness of management's
declared intent.
The Air Force has strategically invested resources to ensure the
success of its Environmental Compliance Assessment and Management
Program (ECAMP). Established in the mid-1980s, ECAMP reviews were
initially voluntary. However, because the major service commands and
installations were slow to adopt environmental auditing, Air Force
headquarters officials decided in mid-1988 to make the reviews
mandatory.
To implement the decision, Air Force headquarters provided $1.2
million to fund environmental audits during 1988 and 1989 and to
initiate an environmental training program for service personnel.
The training was highly effective, we were told, in increasing
employees' environmental awareness and understanding of the need for
ensuring compliance. By investing resources in 1988 and 1989,
headquarters allowed the environmental audit program to get under way
quickly. Since 1990, the major Air Force commands have absorbed the
cost of doing environmental audits of their installations. Officers
of the Air Combat Command's (ACC) environmental staff told us that
ECAMP was integrally involved in their resource allocation process.
Their ECAMP staff assists in annually validating line items for the
headquarters ACC environmental compliance programs' budget.
Furthermore, they plan to have their A-106 program managers
participate as members of the ECAMP team in fiscal year 1995 to
provide on-site assistance/validation.
The Director of Compliance Audits in Union Carbide's Health, Safety
and Environment organization told us that top management has always
demonstrated support by amply funding environmental activities,
including auditing and corrective actions aimed at ensuring
compliance. He listed the company's spending priorities as 1)
achieving compliance, 2) gaining competitive advantage and
maintaining and increasing market share, and 3) reducing
environmental, health, and safety risks. Projects that are needed to
keep the company in compliance with regulatory requirements will
always be funded, he said, and most projects that reduce waste will
also be funded because they generally save costs over time. He
reported that the company spends about $1 million a year on the audit
program alone and that this cost is borne by headquarters rather than
by the operating business units.
AN ADEQUATE NUMBER OF
QUALIFIED STAFF IS AVAILABLE
-------------------------------------------------------- Chapter 2:2.3
An effective environmental audit program requires a sufficient number
of qualified auditors and supervisory audit personnel. According to
the experts we contacted, qualified personnel are trained and
experienced in the techniques of auditing and collectively have
knowledge of all applicable environmental laws and regulations,
understand the role and functioning of environmental management
systems, and recognize organizational processes and practices that
can adversely affect the environment. Moreover, these experts
agreed, because environmental auditing is but one part of a
comprehensive environmental performance management system, an
effective audit program presupposes the existence of complementary
environmental activities, including programs for training employees
in environmental requirements and in their responsibility for
complying with these requirements.
Environmental consultants we interviewed as well as published
materials we examined noted that organizations that begin
environmental auditing typically do not have the trained and
experienced personnel needed for this activity. Nor have they
typically established training programs to develop qualified audit
personnel and to train employees in environmental protection issues
and responsibilities. To overcome these obstacles, these
organizations may (1) engage expert consultants to conduct audits on
their behalf and provide the desired environmental training and/or
(2) hire qualified individuals from the outside to put together
in-house environmental audit and training programs. Some
organizations may use contractors/consultants as an interim measure,
allowing them to build their audit programs gradually and provide
training in step with the evolution of their overall environmental
program. Others, particularly smaller organizations, may opt to rely
exclusively on outside contractors.
Allied Signal followed the path that many organizations have taken to
develop an effective audit program. Allied relied heavily on an
outside contractor's assistance in establishing its program but
gradually moved towards making the audit function an internal
activity. After hiring an environmental consulting firm to perform a
baseline assessment of its environmental compliance in the late
1970s, Allied contracted with the same firm to help design and
implement an internal audit program and provide assistance in
conducting early audits. At about the same time, Allied hired an
experienced environmental professional to head up and direct its
in-house audit program.
Today, Allied's program has evolved to the point that company
personnel, rather than outside consultants, perform the bulk of the
audit work. The program is permanently staffed at the corporate
level with four environmental professionals who serve as audit team
leaders. Audit team members, from throughout the company, are drawn
from a specially selected and trained cadre of "environmental
auditors" who participate in from two to six audits each year, in
addition to carrying out their normal health, safety, or
environmental functions in a plant or major business unit.
Contractor personnel supplement the audit team's membership on a
minority of audits, particularly on overseas audits or on audits for
which special knowledge is required.
THE AUDIT ACTIVITY IS
INDEPENDENT OF THE
FACILITIES AND FUNCTIONS
AUDITED
-------------------------------------------------------- Chapter 2:2.4
According to the corporate audit program managers we contacted,
environmental auditors must be objective and independent of the
facility or activity they are auditing if they are to provide
management with an impartial assessment of a facility's compliance
status. The program managers explained that facility managers and
others responsible for environmental performance are more likely to
perceive the audit to be fair and to accept and act on its findings
if the criteria against which the facility is measured are clear to
them and the auditors are careful to evaluate the facility's
performance against these criteria. Senior management throughout the
organization, we were told, must also recognize and respect the
independence of the audit function, ensuring that there is no
impediment to free inquiry or judgment and no fear of retribution.
Union Carbide ensures the independence and objectivity of its audit
program by operating it as a centralized corporate function. The
audit program is, in fact, the only functional program at the
corporate level. The program is funded by corporate headquarters
rather than by major business units, and it reports directly to the
company's board of directors. It employs a core group of full-time
environmental auditors, most of whom are retired former Union Carbide
employees, who conduct the audits on a contractual basis. Most of
the auditors have been with the program since its inception, have a
good knowledge and understanding of the company's operations, and
have been trained in environmental auditing techniques by Union
Carbide's environmental consultants.
DuPont ensures the independence and objectivity of its audit program
by prescribing the selection criteria for both audit team members and
team leaders and requiring its major corporate business units to
follow these criteria in staffing audits. A major requirement is
that team members and team leaders not be drawn from the site being
audited. Audit team members are typically managers of facilities'
environmental programs, rather than production personnel, and are
selected on the basis of their expertise in the environmental media
under review in the audit.
QUALITY ASSURANCE PROCEDURES
ENSURE THE ACCURACY AND
THOROUGHNESS OF AUDITS
-------------------------------------------------------- Chapter 2:2.5
Another characteristic of effective environmental audit programs is
that they are subject to some type of review mechanism designed to
maintain the quality of the audit system and ensure the validity of
each audit's results. Quality assurance, according to the
authorities we consulted, may be accomplished through continuous
supervision, internal reviews, external reviews, or a combination of
these and other techniques.
Union Carbide and Allied Signal rely primarily on outside consultants
to ensure the continuing quality of their audit programs. In the
case of Union Carbide, environmental consultants participate as team
members in approximately 20 percent of the company's environmental
audits. The contractor determines which outside auditors to assign
on the basis of the expertise needed in each case. After the audits
in which they have participated have been completed, the outside
auditors prepare separate reports. These reports discuss such
matters as how the company's auditors performed, how audit meetings
and interviews were conducted, and how well the audit work was
documented in workpapers. Representatives of the consulting firm use
these reports as a basis for providing feedback to Union Carbide's
management on the operation of the audit program and for recommending
actions to improve it. In Allied Signal's environmental audit
program, outside contractors play a similar role, participating in
about one-third of the company's audits and reporting directly to the
board of directors twice yearly on the operation of the audit
program.
Eastman Kodak employs a variety of mechanisms to ensure the quality
and integrity of its environmental audits. In addition to relying on
corporate team leaders and on outside consultants participating as
audit team members, Kodak employs a separate outside consulting firm
to conduct an independent audit of its health, safety, and
environmental assessment program every 2 years and report back to top
corporate management with findings and recommendations. Kodak also
solicits feedback on audits from its facilities, requiring site
managers to complete and return to corporate headquarters a
questionnaire evaluating the audit team's performance at the audit
site.
ENVIRONMENTAL AUDITS HAVE
ESSENTIAL ELEMENTS
-------------------------------------------------------- Chapter 2:2.6
The preceding discussion focused primarily on elements that are
widely viewed as essential characteristics of successful and
effective environmental audit programs. We found that there is also
substantial consensus on the essential elements of environmental
audits themselves. In large part, this agreement reflects the fact
that environmental auditing has been modeled after financial
auditing, an area in which consensus on standards has existed for
some time.
A comparison of EPA's 1986 policy statement on environmental
auditing, the Environmental Auditing Roundtable's standards for the
performance of environmental, health, and safety (EH&S) audits,
Arthur D. Little's principles for conducting EH&S audits, and the
International Chamber of Commerce's position paper on environmental
auditing reveals basic agreement on the following characteristics of
environmental audits:
Audit work is defined in advance. The coverage and objectives of
an audit are clearly established before the audit takes place,
so that the needs and expectations are completely defined and
understood by the client and the auditee.
An audit is systematic. Audits are based on plans and systematic
procedures that ensure comprehensive and efficient coverage of
all relevant matters and provide guidance in preparing for an
audit, conducting fieldwork, and documenting and reporting
findings.
An audit occurs periodically. Since an audit represents only a
"snapshot" in time, audits are conducted with some specified
frequency to provide assurance of continuing compliance with
requirements and evidence of the continued effectiveness of the
management systems in place to ensure compliance.
Results are documented. The audit culminates in a written report
that clearly communicates the audit's findings in a timely
manner to the intended recipients, with sufficient clarity and
detail to facilitate corrective action.
FEW FEDERAL AGENCIES HAVE
EFFECTIVE ENVIRONMENTAL AUDIT
PROGRAMS
============================================================ Chapter 3
While a few federal agencies have developed environmental audit
programs that they report as achieving substantial benefits, most
federal agencies (particularly civilian agencies) have made little
progress in establishing such programs. A few agencies, such as BLM
and FAA, have some elements of an environmental audit program but are
missing key components. Other agencies have no environmental audit
program at all, even though the experience of civilian agencies has
demonstrated that if an agency's mission is not carried out in an
environmentally responsible way, costly environmental liabilities can
result.
DOE AND THE AIR FORCE HAVE
COMPREHENSIVE ENVIRONMENTAL
AUDIT PROGRAMS
---------------------------------------------------------- Chapter 3:1
DOE and the Air Force have implemented comprehensive environmental
audit programs largely to correct major environmental problems and to
stem adverse publicity arising from some of their past operations.
They embraced environmental auditing as a way to avoid creating new
environmental problems and to ensure compliance with environmental
requirements. To guarantee the success of the audit programs,
managers in each agency provided the necessary financial resources
and staffing and took steps to gain the support of the agency's
employees. As their audit programs matured, these agencies expanded
the scope of their audits beyond environmental compliance to include
examinations of management systems and environmental risks, and they
made other improvements as well. Today, DOE's and the Air Force's
programs are widely regarded as among the best in the public sector.
DOE
-------------------------------------------------------- Chapter 3:1.1
DOE established its environmental audit program in 1990. The
magnitude of DOE's environmental problems was identified in
environmental surveys conducted at 35 major facilities from 1985 to
1989 at the Secretary of Energy's request. The agency also published
a study in December 1988 that estimated the costs of cleaning up all
of DOE's environmental pollution through the year 2010 at $75 billion
to $115 billion.\2 While the environmental surveys of the 1980s were
one-time reviews, top managers recognized the need for periodic
assessments of environmental problems at all DOE facilities.
Accordingly, senior officials created the Office of Environmental
Audit (OEA) to "provide comprehensive, independent, management-level
oversight" of line management's environmental performance in order to
achieve full compliance and excellence in the environmental area.
The Secretary communicated to DOE employees the importance of the
environmental audit program by issuing departmental notices that
emphasized "the need for and value of assessments . . . to ensure
DOE activities are undertaken in an environmentally sound manner . .
. [and] to assure compliance with applicable laws related to
environmental protection."
DOE's environmental audit protocol specifies that all major
facilities nationwide are to be audited once every 3 years. The
scope of the audits includes all environmental media and assesses
compliance with federal, state, and local environmental regulations;
DOE policies and procedures; and best industry practices. DOE's
audits also assess a facility's environmental management systems and
look for ways to manage both regulated and unregulated environmental
hazards. According to DOE officials, the audit teams consist of both
the agency's full-time environmental auditors and contractor
personnel who have specialized environmental knowledge. By using
both contractors and full-time internal auditors, DOE ensures that
the audits are independent and objective.
DOE's audit program guidance requires that auditors prepare a report
at the conclusion of an audit that details the problems found. The
audited facilities must formulate a plan of corrective actions and
must submit quarterly updates to OEA on the actions taken to correct
identified problems. According to DOE documents, DOE budgeted $2.9
million for environmental audits in fiscal year 1994.
As DOE's audit program has matured, OEA has expanded the scope of its
audits from checking only for compliance with environmental
regulations and DOE policies to assessing environmental management
systems. These assessments seek to identify the factors contributing
to the occurrence of observed deficiencies in compliance. In
addition, DOE requires facilities to perform environmental
self-assessments using facility-specific audit manuals. DOE has also
developed quality assurance procedures to ensure that the techniques
and results of all audits are consistent, technically valid, and of
high quality. These procedures ensure that auditors have the
guidance required to effectively perform audits, that this guidance
is updated as needed, and that auditors have received appropriate
training. OEA also visits facilities during an audit to observe
firsthand the implementation of audit guidance and ensure consistency
among audit teams in methods of auditing. While DOE continues to
face billions of dollars in costs to clean up contamination from past
environmental practices, DOE environmental officials stated that
changes to current practices, introduced in response to environmental
audit findings, will avoid future cleanup costs for the agency. On
December 18, 1994, DOE's environmental audit program, which had until
then been under the jurisdiction of the Deputy Assistant Secretary
for Environment, became the programmatic responsibility of the Deputy
Assistant Secretary for Independent Oversight and Appraisals.
--------------------
\2 Environment, Safety, and Health Needs of the U.S. Department of
Energy. More recent estimates put the cost of the cleanup at $300
billion to as much as $1 trillion over a 30-year period.
AIR FORCE
-------------------------------------------------------- Chapter 3:1.2
The Air Force established its environmental audit program (ECAMP) in
1986 in response to the unfavorable publicity and regulatory
attention that the service's poor environmental performance had
attracted. The improper use, storage, and disposal of hazardous
materials and petroleum products pose the greatest problem for the
Air Force and for the Department of Defense (DOD) in general. A 1991
study prepared for DOD estimated the cost to clean up all DOD
facilities at $24.5 billion. The Air Force alone will spend $509
million in 1994 on cleanup.
Once the audit program was established, the Air Force Chief of Staff
communicated to employees the high importance attached to the program
by the service's top management, which had set a goal of zero
enforcement actions against any base and determined that this goal
would be the "measure of merit" for the service. Environmental
auditing was deemed to be the primary tool to measure and ensure
progress towards this goal. To reinforce this point, a brochure sent
to all base commanders stated that "ECAMP helps facilitate
environmental compliance which, in turn, reduces the risk of legal
actions and places the Air Force in a positive position as a steward
of the environment." The brochure further stated that the base
commander was both responsible and personally liable for any
activities at the base that damaged the environment and that he/she
therefore could not afford not to conduct audits.
The Air Force's audit protocol specifies that all facilities are to
be audited once every 3 years. The audits assess compliance with
federal, state, and local regulations and with the service's policies
for all environmental media. According to Air Force officials, audit
teams consist of both contractor personnel with specialized
environmental knowledge and Air Force personnel, from both the base
being audited and from other installations, who are trained in
various environmental media. By using contractors and personnel from
other installations, the Air Force ensures the independence of its
auditors.
At the conclusion of an audit, Air Force auditors prepare a report
that outlines the problems found. The audited facilities must then
plan corrective actions and ensure that these actions are taken.
Documents show that the Air Force budgeted $5 million in fiscal year
1994 for ECAMP reviews.
As ECAMP matured, the Air Force made several major improvements to
the program. While auditors initially checked only for compliance,
the Air Force expanded the scope of the audits to examine
deficiencies in management systems so as to address the root causes
of noncompliance. The agency also trained its personnel in
environmental auditing so that it could decrease its reliance on
contractors.
In addition, Air Force facilities are now required to do self-audits
in the years between ECAMP reviews. Facilities use the ECAMP
protocol to conduct these audits. Findings from the self-audits must
be written up, entered into a computer data base, and tracked to
ensure that deficiencies are corrected. Since the self-audits are
conducted by base environmental officers who are not necessarily
trained in all environmental media, the facilities have contractor
support available. Auditors for the subsequent ECAMP review then
follow up on the self-assessment's findings to ensure that identified
deficiencies have been corrected. Air Force environmental officials
stated that the environmental audit program has led to the timely
correction of problems found during audits and has helped to prevent
future problems.
FEW CIVILIAN FEDERAL AGENCIES
HAVE EFFECTIVE ENVIRONMENTAL
AUDIT PROGRAMS
---------------------------------------------------------- Chapter 3:2
While environmental auditing is widely recognized in the private
sector and in the defense and energy agencies as a means of reducing
environmental compliance problems and their associated costs, most
civilian federal agencies currently do little or no environmental
auditing. At least 16 such agencies currently face cleanup costs in
the millions of dollars and risk significant fines and other
penalties because of past environmental mismanagement and ongoing
violations of existing regulations. Both BLM and FAA have developed
pilot environmental audit programs to address the potential
environmental liabilities at facilities they control; however, both
agencies will need to extend and institutionalize these programs to
deal with the magnitude of their environmental challenges.
Information from EPA indicates that most other civilian federal
agencies are either just beginning to develop environmental audit
programs or have no programs at all.
BUREAU OF LAND MANAGEMENT
-------------------------------------------------------- Chapter 3:2.1
BLM has begun to put in place some of the key elements of an
environmental audit program. Specifically, it has acquired an
auditing capability by contracting with the U.S. Army Corps of
Engineers (the Corps), thereby ensuring the availability of qualified
and independent audit staff. In addition, BLM has designed a
protocol to systematically audit BLM facilities for compliance with
environmental laws and for sound environmental management practices.
BLM is currently conducting environmental audits on a pilot basis.
Improvements are still needed, however, to more fully address the
agency's environmental liabilities.
BLM's mission is to plan for and manage the long-term use of public
lands in federal ownership to achieve the objectives of multiple use
and sustained yield. BLM manages 272 million acres of public lands,
the largest area managed by any federal agency. However, BLM's
stewardship of the public lands has frequently been criticized.
Congressional committees in both the House of Representatives and the
Senate have held hearings on BLM's environmental performance. The
committees focused in particular on the agency's handling of
hazardous materials and solid wastes and on the need for BLM to take
measures, such as environmental auditing, to avoid further
contamination. The National Research Council also criticized the
agency's environmental performance in a 1992 report entitled
Hazardous Materials on the Public Lands and recommended that BLM
adopt an aggressive and proactive strategy for managing hazardous
materials and solid wastes. BLM has about 300 sites on EPA's Federal
Facilities Compliance Docket requiring cleanup at a cost estimated in
the hundreds of millions of dollars. Moreover, BLM has thousands of
other sites that may be contaminated but have not yet been inspected.
Most of BLM's environmental problems have been created by the private
users of public lands, such as miners. However, BLM's own activities
also pose potential threats to the environment. For example, BLM
operations involve the use, storage, and disposal of solvents,
pesticides, and hazardous materials, many of which are flammable.
BLM has numerous underground fuel storage tanks, and several BLM
programs generate infectious wastes. One of the biggest challenges
for BLM is ensuring the safety of the many drinking water systems it
operates to service public campgrounds and visitor centers on lands
managed by BLM.
BLM began developing its environmental audit program in 1993 when
employees at its Denver Service Center--which serves as a technical
assistance and support group to the agency but has no line
authority--were prompted by criticism of BLM's environmental
performance to look for a way to better ensure compliance with
environmental laws. In 1993, the Center hired an environmental
engineer to design and implement an audit program for the agency.
Since then, pilot audits have been conducted in several BLM state
offices that have volunteered to participate in the program.
BLM's environmental audit program has clear objectives and some key
program elements. The stated objectives are to (1) assist managers
in identifying compliance problems and the resources necessary to
correct them, (2) increase environmental awareness, and (3) minimize
potential liabilities. The agency has contracted with the Corps for
assistance in developing the audit program. BLM developed an audit
protocol that establishes systematic audit procedures and provides
uniform guidance in order to promote consistency and uniformity in
preparing for an audit, conducting fieldwork, and reporting findings.
Audits are conducted by Corps auditors under the oversight of the BLM
audit coordinator. One or two staff from the audited facility also
participate as members of the audit team, primarily for the
educational value. By relying primarily on Corps auditors, BLM
ensures that the audits are independent and objective.
BLM has made progress in establishing an environmental audit program.
Improvements are still needed, however, to develop a program that can
significantly minimize the agency's environmental liabilities.
Specific improvements include the following:
While a few state offices have provided financial support for pilot
audits, BLM headquarters has not provided any funding for 1995.
BLM headquarters needs to make funding available for state
offices to continue to conduct pilot audits and for the agency
to develop a permanent program of regular and periodic audits.
BLM's top management needs to submit requests for funds to the
Office of Management and Budget (OMB) to correct identified
deficiencies requiring capital expenditures. OMB directs
federal agencies to submit requests to it for environmental
projects costing over $10,000 that are needed to maintain
compliance with environmental laws. BLM found, in conducting
its initial audits in the fall of 1993, that several drinking
water systems were not in compliance and would cost an estimated
$30,000 per site to fix; however, BLM headquarters officials
have not submitted any funding requests to OMB. According to
several field environmental officials, BLM headquarters has not
yet made following up on audit findings a priority.
BLM needs to develop a quality assurance system to ensure the
integrity of the audit process and the consistency and
reliability of the audit results. BLM's audit coordinator
explained that he did not want to establish a quality assurance
system unless the agency's top management made a commitment to
continue the environmental audit program beyond the pilot phase.
BLM needs to encourage the extension of environmental auditing
beyond the agency's own facilities to the operations of private
users of the public lands--the area of greatest liability for
the agency. As discussed more fully in chapter 4, both EPA
officials and BLM environmental officials believe that BLM has a
responsibility under the Federal Land Policy and Management Act
(FLPMA) to encourage proactive environmental practices, such as
environmental auditing.
The need for improvement in BLM's program is to be expected, given
the early stages of the program's development. Nevertheless, as
discussed in chapter 4, significant obstacles and disincentives need
to be removed if the Bureau's program is to become effective.
FEDERAL AVIATION
ADMINISTRATION
-------------------------------------------------------- Chapter 3:2.2
FAA, like BLM, has begun to develop the essential elements of an
environmental audit program. Like BLM, FAA has obtained the
necessary expertise to conduct audits by contracting with the Corps,
thereby ensuring the qualification and independence of the audit
staff. FAA has also designed a protocol to systematically audit
facilities for compliance with environmental laws. Like BLM, FAA is
conducting environmental audits on a pilot basis and still needs to
develop the program further to more fully address the agency's
potential environmental liabilities.
FAA's mission is to provide a safe, secure, and efficient global
aviation system that contributes to national security and promotes
U.S. aviation. The agency has 8,500 facilities that carry out this
mission. Potential threats to the environment from FAA's operations
at these facilities stem from such activities as the disposal of
waste oils and solvents, the handling of PCBs in radar equipment, the
servicing of machinery, and the use and storage of hazardous
materials. FAA is currently most concerned about the potential
hazards posed by leaks from its approximately 3,000 underground fuel
storage tanks. The agency estimates that bringing all of these tanks
into compliance with environmental requirements will cost $200
million. Of this amount, $78.8 million had been spent through fiscal
year 1994.
Because of contamination caused by past operations, one FAA facility
was named to the National Priorities List (NPL) for Superfund sites,
and 59 facilities have been put on EPA's Federal Facilities
Compliance Docket for further evaluation and possible cleanup. FAA
currently spends $13 million to $20 million a year to clean up
environmental damage from past improper handling of hazardous
materials. FAA's Technical Center, which was named to the NPL in
1985 for leaks and spills of hazardous materials, will require an
estimated $25 million to $30 million to clean up. To address the
environmental damage caused by its operations, the Center developed
its own environmental audit program in 1988. The Center's
environmental audits began as examinations of the facility's
practices for managing hazardous materials and were expanded to
include other environmental media and to check for compliance with
federal, state, and local environmental laws.
FAA headquarters recognized the need for environmental audits as
early as 1990, when a cooperative effort was initiated with the
Office of the Secretary of Transportation. After an interagency
agreement was developed between FAA's Southern Region and the Corps,
FAA began to develop the current audit program in 1991, using the
Corps' expertise. The agency allocated $3.6 million over 3 years to
develop and test the pilot program in the Southern Region, for
subsequent use nationwide. The pilot phase of field implementation
started in 1992 and ended in July 1994, when implementation of the
national program began. The program has been extended to three
additional regions (Southwest, Central and Alaskan) and the
Aeronautical Center. Expansion to all regions is scheduled in 1995.
According to FAA's strategic plan for the environmental audit
program, the audits will help the agency (1) understand its
environmental problems, (2) prioritize these problems, and (3)
estimate the costs of correcting the problems. The Corps has adapted
the Army's environmental audit protocol to reflect the issues of most
concern to FAA and its facilities. Corps auditors conduct the
audits, while one person from the audited FAA facility participates
as an audit team member.
FAA has made progress in establishing an environmental audit program.
FAA environmental officials, however, acknowledge that the program
needs to be implemented more widely and refined if it is to
significantly reduce the agency's environmental liabilities. For
example, the program is not yet fully developed in the following
areas:
The audits conducted by the Corps do not examine environmental
management systems, whose weaknesses are often the root cause of
compliance problems. Audits of environmental management systems
have been conducted separately at the FAA Technical Center but
have not yet been implemented in the regions.
FAA has contracted with the Corps to audit all of its facilities
through 1998. While the agency reports that it intends to
continue environmental auditing after that date, it has not yet
finalized the program's structure. As data from the initial
audits are evaluated, officials told us, the format of the
program will be adjusted to optimize effectiveness. The agency
will also reassess the role of the Corps in the continuing
program, as it determines whether in-house resources or
contractor resources will better meet its long-term audit needs.
The agency is planning to conduct quality assurance evaluations of
the compliance audits conducted by the Corps but has not yet
completed these evaluations. The oversight evaluation process
began in November 1994. The first of two sets of field visits
was conducted in January 1995, and the second set is planned for
March 1995. Agency officials told us that the evaluations are
meant to provide a quality check for the audit process and to
foster the continuous improvement of environmental compliance
management systems and procedures.
Because environmental auditing is still in the early stages of
development in FAA, some of the gaps in the agency's program are to
be expected. However, for environmental auditing to become an
effective tool for minimizing the agency's potential environmental
liabilities, the gaps in the program and other obstacles and
disincentives, discussed in chapter 4, need to be addressed.
OTHER CIVILIAN FEDERAL
AGENCIES
-------------------------------------------------------- Chapter 3:2.3
Civilian federal agencies other than BLM and FAA have compliance
problems and environmental liabilities that could be addressed
through environmental auditing, but information from EPA indicates
that environmental auditing is limited among civilian federal
agencies.
Under Executive Order 12088, all federal agencies are required to
comply with federal, state, and local environmental laws in carrying
out their missions. Furthermore, as the experience of defense
agencies has shown, failing to comply with environmental laws in
conducting routine activities can result in severe consequences. For
example, DOD employees have been prosecuted for failing to comply
with environmental laws in disposing of substances such as paint and
radiator fluid. EPA and state regulators have imposed stiff fines on
several military facilities for violations such as failing to
properly contain and label hazardous waste or to determine whether
stored waste was hazardous. Civilian agencies' routine operations
involve the same kinds of materials and activities as were involved
in these enforcement cases.
In addition, civilian agencies have demonstrated that if they do not
carry out their missions in an environmentally responsible way,
costly cleanup problems can result. Sixteen civilian federal
agencies have facilities on EPA's Federal Facilities Compliance
Docket, making up about half of all the sites on the docket. As we
reported in April 1994, many civilian agencies have been slow to
assess the true costs of cleaning up their facilities, but estimated
costs are in the billions of dollars.\3
Many civilian environmental officials are concerned that their
agencies do not have programs adequate to handle the environmental
liabilities arising from their agencies' operations. In response to
these concerns, EPA has formed the Civilian Federal Agency Task
Force, a group of environmental officials representing 21 civilian
departments and agencies. The task force's mission is to identify
needed improvements in civilian agencies' environmental programs and
to make recommendations for addressing these needs.
To assist the task force, EPA administered a survey of civilian
federal agencies and subagencies in 1993 to assess the status of
their environmental programs. (See app. II for a listing of the
agencies participating in the Civilian Federal Agency Task Force and
a listing of the agencies responding to EPA's survey.) According to
the survey respondents, civilian federal agencies have a widespread
need to improve compliance with environmental laws, to enhance
employees' environmental awareness, and to establish or strengthen
environmental compliance programs. Of 19 agencies responding to the
survey question on environmental auditing, 8 (or 42 percent)
indicated that their agencies did not have an "environmental
auditing, assessment, or other system" in place to oversee and
monitor their compliance activities. Moreover, according to the EPA
official chiefly responsible for working with the task force's
members, the civilian agencies that were conducting environmental
audits had yet to develop strong programs.
--------------------
\3 Federal Facilities: Agencies Slow to Define the Scope and Cost of
Hazardous Waste Site Cleanups (GAO/RCED-94-73, Apr. 15, 1994).
WIDER USE OF ENVIRONMENTAL
AUDITING COULD IMPROVE
AGENCIES' COMPLIANCE AND SAVE
MONEY
---------------------------------------------------------- Chapter 3:3
As the private sector's experience has shown, environmental auditing
can help improve environmental compliance by enabling organizations
to detect and correct problems before they become significant
liabilities, strengthen internal systems designed to ensure
compliance, and increase employees' environmental awareness and
capability. In addition, environmental auditing can help agencies
avoid the costs of expensive environmental cleanups, avoid fines and
penalties, and identify ways of operating more efficiently.
NONCOMPLIANCE COULD BE
IDENTIFIED AND ADDRESSED
THROUGH ENVIRONMENTAL
AUDITING
-------------------------------------------------------- Chapter 3:3.1
Environmental auditing can be instrumental in bringing civilian
federal agencies into compliance with environmental laws. While
auditing is only one component of a comprehensive environmental
management system, it is recognized as an indispensable tool for
achieving compliance. Indeed, pilot environmental audits conducted
at BLM and FAA demonstrate that environmental auditing helps agencies
to proactively bring facilities into compliance with environmental
laws.
Through pilot environmental audits at BLM, numerous serious
deficiencies were identified and corrected--deficiencies very similar
to those for which defense agencies have incurred stiff enforcement
penalties. The BLM pilot audits found, for example, that BLM
facilities were storing flammable materials with ammunition,
disposing of hazardous waste as nonhazardous waste, conducting fire
training without the required air emission or water discharge
permits, improperly disposing of infectious wastes, and maintaining
substandard drinking water systems on public campgrounds. According
to BLM officials, about 90 percent of these identified deficiencies
were correctable with minimal effort and expense. According to BLM
personnel, upgrading the public drinking water systems and containing
hazardous wastes are the only corrective actions requiring
expenditures of more than $10,000.
FAA's Technical Center in Atlantic City, New Jersey, has also found
environmental auditing to be instrumental in bringing the facility
into compliance with environmental laws. Because of its history as
one of the nation's worst hazardous waste sites, the Technical Center
is among the few civilian federal facilities to have been subjected
to a fairly high level of regulatory attention. Starting in 1978,
the Center received notices of violation, consent decrees, warning
letters, and fines from both federal and state regulators. However,
no enforcement actions have been taken against the Center since 1991.
The Center's environmental manager attributes this dramatic change to
the effectiveness of the Center's environmental compliance
program--which includes environmental auditing as an integral
part--in bringing the facility into compliance. Like BLM officials,
Center officials have found that the deficiencies they discover
through environmental auditing can, for the most part, be corrected
at minimal cost.
ENVIRONMENTAL AUDITING COULD
HELP CIVILIAN FEDERAL
AGENCIES STRENGTHEN
COMPLIANCE SYSTEMS
-------------------------------------------------------- Chapter 3:3.2
Beyond identifying immediate compliance problems, environmental
auditing could help civilian federal agencies strengthen the
environmental management systems that are necessary to achieve
continuing compliance. These systems deal with how an organization
is equipped to achieve compliance--its staffing and training,
policies and procedures, and record-keeping and emergency response
planning. As a DOE environmental auditor told us, "it is impossible
to remain in compliance without environmental management systems and
an environmental audit program to verify that they are working
properly."
Civilian federal agencies acknowledge that in many cases their
systems to achieve compliance are either weak or nonexistent.
According to EPA's 1993 survey of civilian federal agencies, only one
agency had an adequate agencywide environmental data base to ensure
the maintenance of proper environmental records (e.g. waste records,
discharge permits, etc.). Half of the survey respondents stated that
guidance on environmental laws is provided to employees only on an
informal and ad hoc basis or not at all. Similarly, the Civilian
Federal Agency Task Force issued a report that characterized the
status of environmental management systems in civilian agencies as
follows:
"[M]any agencies have reported being understaffed with even
minimally trained personnel. Those that are available are often
not provided with adequate guidance when performing job
functions and mission duties that are affected by environmental
laws . . . Many agencies are not equipped with automated
environmental databases to ensure proper [environmental] records
are maintained . . . ."
In their limited experience with environmental auditing thus far,
environmental officials at both FAA and BLM have found it to be an
invaluable means of identifying needed improvements in environmental
management systems. The environmental manager at FAA's Technical
Center told us that environmental audits frequently reveal patterns
of deficiencies that are corrected Center-wide through changes to
procedures or policies. For example, in response to environmental
audit findings, the Center has improved its recycling procedures and
developed plans for its laboratories to manage hazardous materials.
Similarly, BLM's pilot environmental audits have produced agencywide
improvements in environmental policies and staffing. One pilot audit
resulted in a policy requiring BLM staff before purchasing hazardous
materials to consult with environmental personnel to determine
whether a less hazardous alternative could be substituted. Another
pilot audit recommended changes in staffing to ensure that public
water supplies at BLM facilities are sampled properly.
ENVIRONMENTAL AUDITING COULD
INCREASE EMPLOYEES'
ENVIRONMENTAL AWARENESS
-------------------------------------------------------- Chapter 3:3.3
Organizations with experience in environmental auditing have found it
to be a very effective means of teaching their employees how to do
their jobs in compliance with environmental laws. According to
environmental officials in civilian federal agencies, federal
personnel urgently need to be trained in their environmental
responsibilities. For example, the Civilian Federal Agency Task
Force recently concluded that "a significant number of Federal agency
personnel from executive management to staff level lack an awareness
of legal responsibilities or appropriate management controls that
support compliance and reduce liabilities."
Our discussions with FAA and BLM personnel confirm the need for
heightened environmental awareness in these agencies. For example,
an official in DOT's Office of the Inspector General told us that FAA
employees often do not understand the environmental hazards involved
in routine operations, such as changing equipment parts. An FAA
headquarters environmental official told us that many longtime FAA
employees act in environmentally irresponsible ways because they have
the attitude that "I've always gotten away without complying, so why
should I change now?"
Although only a limited number of environmental audits have been
conducted at FAA, an increase in employees' environmental awareness
has been noted as a benefit. The audit manager at FAA's Technical
Center stated that through the audit process, staff "up and down" the
chain of command have learned a great deal about their environmental
responsibilities. In a similar vein, the coordinator of the pilot
audits conducted in FAA's Southern Region observed that one of the
primary benefits of the audits is that they help employees to
understand environmental issues and how their facility's activities
need to be conducted to ensure compliance.
BLM's pilot audits have also discovered and addressed gaps in
employees' knowledge of environmental responsibilities. For example,
an audit team found that BLM personnel were allowing hazardous
materials to accumulate instead of disposing of them, thereby
violating regulations for storing hazardous materials. The root
cause of this problem, according to the audit team leader, was simply
that the employees did not know how to dispose of the materials in
compliance with the law. In another instance, the audit team found
that BLM employees were using pesticides for weed control when the
weeds could easily have been controlled--with less risk to employees
and to the environment--through mechanical means.
WIDER USE OF ENVIRONMENTAL
AUDITING COULD REDUCE
AGENCIES' COSTS
-------------------------------------------------------- Chapter 3:3.4
In addition to improving federal agencies' compliance with
environmental laws, environmental auditing can save costs by (1)
avoiding the costs of cleaning up contamination, (2) avoiding the
costs of fines, penalties, and other regulatory actions, and (3)
identifying ways of operating more efficiently.
FEDERAL AGENCIES COULD
AVOID THE COSTS OF
CLEANING UP CONTAMINATION
------------------------------------------------------ Chapter 3:3.4.1
Evidence is mounting that federal agencies face staggering costs to
clean up the environmental damage resulting from poor environmental
practices. In April 1994, we reported that "the effort to clean up
federal hazardous waste sites is likely to be among the costliest
public works projects ever attempted by the government."\4 While many
agencies have been slow to quantify their cleanup liabilities,
estimates of the federal government's cleanup costs range in the
hundreds of billions of dollars. A large portion of this liability
has been created by federal defense and energy agencies. However,
civilian federal agencies have also incurred cleanup liabilities.
For example, FAA has preliminarily estimated that it faces $183
million in cleanup costs for the period from 1995 to 2002. BLM has
yet to estimate its cleanup costs, but sources such as the National
Academy of Sciences estimate BLM's cleanup liability to be several
hundred million dollars.
As discussed in chapter 2, private sector organizations and DOE and
DOD agencies have found that environmental auditing is a means to
avoid incurring future cleanup costs. The environmental audits
already conducted at civilian agencies, while limited in coverage,
demonstrate how environmental auditing can also help these agencies
save money by correcting deficiencies before they result in costly
liabilities. For example, an audit at FAA's Technical Center
revealed that oil left outdoors in open containers for fire
extinguisher training was overflowing and contaminating the ground
when it rained. Speaking from his experience with previous cleanups
at the Technical Center, the audit manager stated that if the oil
spillage had not been discovered during the audit, the Center could
have been required to spend additional dollars investigating the
contamination before the actual cleanup could even begin. He added
that if an environmental audit program had been implemented at the
Center in the 1960s, the current cleanup costs (estimated at $25
million to $30 million) could have been avoided. These cleanup
costs, he explained, resulted from deficiencies that environmental
audits routinely identify and resolve.
A pilot audit in FAA's Southern Region also found and led to the
correction of a compliance problem, avoiding a possibly costly
cleanup. The audit discovered that hazardous materials were being
stored improperly in a facility bordering a wetland. The audit
manager estimated that if the stored chemicals had contaminated the
wetland--a very real risk--the cleanup would have cost up to $5
million. Once the hazard was discovered, staff at the facility were
able to correct it at minimal cost.
As the National Academy of Sciences reported in 1992, in
accommodating users of the public lands (in particular, hardrock
mining and oil and gas drilling operations), "BLM has overlooked or
tolerated increasing contamination of its lands with a variety of
hazardous materials, for which it is now a reluctant custodian." We
found that some companies operating on BLM lands voluntarily conduct
environmental audits, which, they report, not only benefit the
company but also protect the public lands from contamination and its
associated costs. However, many other companies operating on BLM
lands do not conduct environmental audits, and BLM officials are
reluctant to encourage them to do so. Line management officials in
BLM stated that whether or not companies operating on BLM lands
conduct environmental audits is outside the scope of their
responsibility.
--------------------
\4 Federal Facilities: Agencies Slow to Define the Scope and Cost of
Hazardous Waste Site Cleanups (GAO/RCED-94-73, Apr. 15, 1994).
FEDERAL AGENCIES COULD
AVOID THE COSTS OF FINES
AND PENALTIES
------------------------------------------------------ Chapter 3:3.4.2
Although EPA and state regulators have thus far devoted little
enforcement attention to many civilian federal agencies, these
agencies may find, as DOE and DOD agencies already have done, that
after inspections occur, noncompliance can be costly. For example,
EPA fined the Naval Air Facility, El Centro, California, $257,000 for
failing to determine whether stored waste was hazardous and for
storing incompatible wastes together. The state of California seeks
fines totaling about $760,000 from six military bases for failing to
properly contain and label hazardous waste and inadequately training
hazardous waste workers. These fines are particularly relevant to
civilian federal agencies because they were issued for violations
very similar to those existing at many civilian agencies' facilities.
The Air Force Air Combat Command, headquartered at Langley Air Force
Base, Virginia, reveals the extent to which environmental auditing
can help a federal facility avoid the costs of fines and penalties.
In 1994, Command environmental officials estimated that the audit
program saved the Command more than $4 million annually in avoided
fines and penalties.
FEDERAL AGENCIES COULD
IDENTIFY SAVINGS THROUGH
MORE EFFICIENT OPERATIONS
------------------------------------------------------ Chapter 3:3.4.3
In addition to helping federal agencies avoid the costs of cleanups
and regulatory fines, environmental auditing can help the agencies
identify ways to operate more efficiently. The results of the pilot
audits at BLM demonstrate these kinds of savings. Through one audit,
BLM personnel learned that using a different type of battery would
reduce the amount of plastic that the facility was discarding and
would cut the cost of replacing a battery from $60 to $40. Another
audit corrected a misapprehension that led BLM personnel to dispose
of alkaline batteries, which are nonhazardous, as if they were
hazardous waste. The audit team estimated that the audited facility
had spent $30,000 more than was necessary to dispose of alkaline
batteries.
The pilot audit teams also found that BLM overpurchases hazardous
materials. The audit teams found that BLM personnel were purchasing
hazardous materials in bulk to obtain discount prices, but most of
the materials were never used, presenting a hazardous material
storage and disposal problem and wasting BLM funds. The auditors
suggested that before purchasing a hazardous material, BLM personnel
first check with other local BLM facilities for any surplus of the
material and then limit any purchase, if required, to the quantity
actually needed.
CONCLUSIONS
---------------------------------------------------------- Chapter 3:4
Some federal agencies, such as DOE and the Air Force, have joined the
private sector in establishing environmental audit programs from
which the agencies have derived significant benefits. The pilot
audits at BLM and FAA demonstrate that civilian federal agencies can
also derive benefits from environmental auditing. These benefits may
include (1) improving compliance with environmental laws, (2)
strengthening the management systems necessary to achieve compliance,
(3) heightening employees' environmental awareness, and (4) achieving
cost savings by reducing cleanup costs, avoiding fines and penalties,
and identifying more cost-effective ways to operate. Information
from EPA indicates that the need for these kinds of benefits is
widespread among civilian agencies.
While it is encouraging that some agencies have initiated
environmental auditing, much more remains to be done if civilian
agencies are to build audit programs that can provide benefits such
as DOE, DOD, and a number of private organizations have realized.
Some agencies, such as BLM and FAA, will need to expand their current
programs and ensure that they become permanent programs. Other
agencies will need to introduce environmental auditing into their
organizations and determine how to implement it. The continued
development of environmental auditing in the civilian federal sector
will depend, however, on overcoming certain obstacles and
disincentives, as discussed in chapter 4.
AGENCY COMMENTS
---------------------------------------------------------- Chapter 3:5
DOT commented that the Department's and FAA's management fully
support FAA's environmental audit program and have made a commitment
to fully implement the program to ensure the agency's compliance with
all environmental requirements. Similarly, DOD commented that it is
committed to full and sustained environmental compliance. DOD agreed
that strong environmental audit programs are essential to achieving
and maintaining compliance, and it concurred generally with GAO's
recommendations. DOE noted its satisfaction that GAO had found that
the Department had made significant progress toward developing an
effective environmental audit program that is used to improve
environmental performance and reduce costs. DOE also concurred with
GAO's recommendations. While neither DOI nor BLM provided written
comments, DOI's Assistant Secretary for Land and Minerals Management
commented informally that DOI and BLM would carefully consider GAO's
findings and recommendations as they proceeded to develop and
implement BLM's environmental audit program.
OBSTACLES INHIBIT THE DEVELOPMENT
OF ENVIRONMENTAL AUDIT PROGRAMS IN
CIVILIAN FEDERAL AGENCIES
============================================================ Chapter 4
Although some civilian agencies, such as BLM and FAA, have launched
pilot environmental audit programs, the further development of
environmental auditing in the civilian sector will require overcoming
several obstacles. In particular, senior managers in civilian
agencies will need to be persuaded to make the same strong and
explicit commitment to environmental auditing as the managers of
organizations with effective programs have made. However, senior
civilian agency managers may see little reason to support
environmental auditing as a means of achieving compliance because,
under the current EPA and state inspection strategy, many agencies
have little risk of being inspected. The further development of
environmental auditing in civilian agencies is also hampered by (1)
lack of the necessary environmental expertise within some agencies
and (2) EPA policies and practices that provide managers with only
vague assurance that taking the initiative to audit for compliance
and to correct violations will in any measure reduce the penalties
for violations.
STRENGTHENING ENVIRONMENTAL
AUDIT PROGRAMS WILL REQUIRE
MORE SUPPORT FROM CIVILIAN
AGENCY MANAGERS
---------------------------------------------------------- Chapter 4:1
While officials experienced in environmental auditing reported that
clear and tangible management support is essential to the success of
audit programs, such support has yet to be evidenced at some civilian
agencies. As stated in chapter 2, according to experts in
environmental auditing whom we interviewed, building strong
environmental audit programs requires senior managers to take steps
such as issuing statements notifying personnel of management's
support for the program, providing adequate and reliable funding for
the program, personally reviewing audit reports, and ensuring that
environmental audit findings are promptly addressed. Senior managers
at some civilian agencies have yet to take such steps.
At FAA, we found that senior management is not yet formally involved
in reviewing environmental audit reports and following up on audit
results--actions that demonstrate concretely and convincingly the
importance management attaches to environmental compliance and
performance. However, we were informed by FAA headquarters
environmental officials that in February 1995 top management issued a
policy statement (1) informing agency personnel of management's
commitment to full compliance with safety and environmental
requirements and (2) setting an expectation for employees to support
and participate in achieving a high level of environmental
performance. We were also informed that management has issued a
series of directives to all Regional Airway Facilities Division
managers stating the importance of the environmental audit program
and delineating the process to be followed.
At BLM, we found that the pilot environmental audit program was
undertaken largely at the initiative of field environmental
officials. BLM management has yet to issue a statement endorsing the
program or urging personnel to support it. BLM senior managers also
do not review environmental audit reports nor do they play a role in
ensuring that audit findings are corrected. Furthermore, funding for
the pilot program has been sporadic; funding for fiscal year 1994 was
provided only at the end of the year, and headquarters has provided
no funding as yet in fiscal year 1995.
Gaining strong management support for environmental auditing at BLM
may be especially important to expanding the program to address the
agency's major environmental liabilities--those created by private
operations, such as oil and gas drilling and mining, on BLM lands.
Field environmental officials at BLM suggest that, with stronger
senior management support, the agency could do more to encourage
environmental auditing among the users of BLM lands. BLM
environmental officials suggest that the BLM order governing the use
of public land for oil drilling and the BLM permits authorizing
mining on public lands could be amended to encourage environmental
auditing. As the agency builds its expertise in environmental
auditing, BLM's field environmental officials believe the agency
could conduct outreach through professional organizations
representing oil and gas or mining companies to encourage
environmental auditing for operations conducted on BLM lands.
Officials from EPA's Office of Enforcement and Compliance Assurance
(OECA) told us that, in view of BLM's responsibility for the
environmental practices of public land users under the Federal Land
Policy and Management Act (FLPMA), they strongly believe that BLM
should do more to encourage these land users to implement sound
environmental practices, such as environmental auditing. Their
position is consistent with our finding in 1991 that FLPMA made BLM
primarily responsible for protecting the environment on its lands,
even on those lands used by private companies.\5
According to EPA's 1993 survey of civilian federal agencies, senior
managers in other agencies will need to demonstrate their support if
environmental auditing is to develop further in the civilian sector.
While managers in 10 civilian federal agencies were reported to have
shown support for environmental compliance programs, managers in 8
other agencies were reported not to have done so. At meetings of the
Civilian Federal Agency Task Force, members commented that top
management's commitment to environmental programs is not
well-established and, as a result, the development of environmental
programs is limited. Members of the task force also reported that
the resources provided for environmental compliance programs are
insufficient.
Understandably, the fiscal constraints facing federal agencies
present a challenge to managers seeking to adequately fund
environmental programs. Furthermore, the progress in implementing
environmental programs in DOE and DOD is largely attributable to the
level of resources the Congress has provided to respond to the huge
environmental problems associated with these agencies' activities.
Nonetheless, many organizations have found that a judicious
investment of resources in environmental auditing can yield
substantial benefits in terms of enhancing environmental compliance,
reducing the costs of cleanups, and avoiding the costs of
noncompliance.
--------------------
\5 Mineral Resources: Increased Attention Being Given to Cyanide
Operations (GAO/RCED-91-145, June 20, 1991).
CIVILIAN FEDERAL MANAGERS MAY
HAVE LITTLE INCENTIVE TO
SUPPORT ENVIRONMENTAL AUDITING
---------------------------------------------------------- Chapter 4:2
While senior management's support is essential to building a strong
environmental audit program, civilian managers may have little
incentive to support environmental auditing because, under the
current EPA and state inspection strategy, many civilian agencies
have little risk of being inspected. Moreover, federal managers may
not give environmental auditing the priority that private sector
managers do because federal agencies are subject to limited
enforcement authorities under most state and federal environmental
laws.
FEW CIVILIAN AGENCIES HAVE
BEEN TARGETED FOR
INSPECTIONS
-------------------------------------------------------- Chapter 4:2.1
According to agency environmental officials we interviewed, one
factor explaining management's historically weak support for
environmental auditing is that federal and state regulators have, at
least until recently, devoted relatively little attention to the
compliance status of most civilian federal agencies. FAA and BLM
environmental personnel we spoke with told us that, to the best of
their knowledge, agency facilities with which they are familiar have
never been inspected by EPA or state regulators. Consequently, they
said, many top agency managers have seen little reason to use scarce
resources to perform environmental audits aimed at gauging and
ensuring compliance. These officials added that if EPA is serious
about fostering environmental auditing among civilian federal
agencies, it must ensure that these agencies' facilities receive some
measure of attention from federal and state regulatory inspectors.
While EPA's 1986 policy on environmental auditing states that "a
credible enforcement program provides a strong incentive for
regulated entities to audit," the agency's inspection data suggest
that EPA and the states have historically devoted little enforcement
attention to many civilian agencies. Understandably, in view of the
extensive environmental liabilities resulting from DOE's and DOD's
operations, EPA and the states have historically devoted most of
their resources for inspecting federal agencies to these two
agencies' facilities. However, the inspections conducted at civilian
federal agencies have been concentrated on a few agencies' facilities
while other civilian federal agencies with significant liabilities
have received few, if any, inspections.
Recent inspection data suggest that federal and state regulators may
be starting to pay more attention to the compliance status of
civilian federal agencies. In fiscal year 1994, according to data
supplied by EPA, a total of 280 inspections were conducted at
civilian federal agencies' facilities. According to the data, FAA's
facilities received 15 inspections--3 by EPA and 12 by state
regulators under the RCRA, National Pollutant Discharge Elimination
System (NPDES), and Toxic Substances Control Act of 1976 (TSCA)
programs. While the data do not indicate how many, if any,
inspections were made at BLM's facilities, 49 inspections--16 by EPA
and 33 by state authorities--were made at DOI's facilities under the
RCRA, NPDES, and TSCA programs. After DOI, the Department of
Veterans Affairs and the Department of Justice (Bureaus of Customs
and Prisons) received the largest number of inspections: 43 and 29,
respectively.
Officials from EPA headquarters' Office of Enforcement and Compliance
Assurance (OECA) told us that they have been concerned for years
about the scant enforcement attention paid to many civilian agencies.
The Director of Planning, Prevention and Compliance in OECA's Federal
Facilities Enforcement Office acknowledged that although EPA has
inspected some of the more "visible" civilian facilities, it has not
attempted to methodically inspect the civilian sector to ensure that
each agency receives at least a measure of regulatory attention.
According to the Director, the regions' autonomy and the agency's
heavy delegation of authority to state programs make it difficult to
implement such a strategy.
STATE AND FEDERAL
ENFORCEMENT AUTHORITIES ARE
LIMITED
-------------------------------------------------------- Chapter 4:2.2
Historically, limitations on the enforcement authorities available
for state and federal regulators to use against federal agencies that
violate environmental laws have discouraged the allocation of scarce
inspection resources to these facilities. These same limitations may
also have discouraged federal managers from employing tools, such as
environmental auditing, to ensure compliance.
Limitations on the ability of EPA and state regulators to enforce
environmental statutes against federal agencies stem from two primary
sources. The first is the legal doctrine of sovereign immunity,
under which the United States is immune from suit by states or
private parties unless the Congress has waived this immunity in clear
and unambiguous terms. The second is the Department of Justice's
(DOJ) position in prior administrations that legal disputes between
executive branch agencies, whose heads serve at the pleasure of the
President, are properly resolved by the President rather than by the
courts.
Because of court decisions upholding the sovereign immunity of
federal agencies under RCRA and DOJ's past opposition to EPA's
exercise of unilateral order authority against federal agencies
violating environmental laws, the range of enforcement options
available against these agencies has been significantly
circumscribed. Hence, regulators have had to rely primarily on
cumbersome, time-consuming, and often ineffective negotiation
procedures aimed at achieving mutually acceptable memorandums of
understanding and compliance agreements to be policed within the
executive branch.
Dissatisfaction with this state of affairs and the disparity that it
engendered in compliance between the public and the private sectors
led the Congress in September 1992 to enact the Federal Facility
Compliance Act (FFCA). This act explicitly waived the sovereign
immunity of federal agencies with respect to violations of RCRA and
allowed state and federal agencies to use the full range of
enforcement remedies, including civil fines and penalties for past
violations, against noncomplying federal agencies. FFCA reflected
the Congress's deep frustration with agencies' slow progress in
dealing with hazardous waste violations at DOE and DOD facilities.
The act was designed to eliminate what was perceived as a double
standard in the enforcement of environmental laws under which the
private sector and state and local governments were forced to comply
but federal facilities were not. One of the key congressional
backers of the legislation noted that "[w]ithout state enforcement
under a waiver of sovereign immunity, there is no one to assure
compliance. The result is that the federal government can and does
act as if it is above the law."
FFCA, however, applies only to violations of RCRA, not of other
federal environmental statutes. Thus, the same impediments that
constrained EPA and the states in enforcing RCRA may inhibit
regulators from enforcing other environmental laws against federal
agencies.
The current administration is on record as supporting changes to the
Clean Water Act and the Safe Drinking Water Act similar to those made
to RCRA in 1992 by FFCA. A 1993 administration position paper cites
a 1988 GAO report's\6 findings as justification for waiving the
sovereign immunity of federal agencies under these acts and granting
EPA the same administrative enforcement authority at federal
facilities for these laws as it now has for RCRA. The position paper
notes our 1988 report's findings that federal facilities consistently
demonstrated higher rates of significant noncompliance with the Clean
Water Act's requirements than private industrial facilities and that
taking enforcement action against noncompliant federal facilities
increased the priority being given to environmental compliance and
corrective actions. However, as we reported, such enforcement action
was relatively rare. EPA regional officials said that they did not
take enforcement action in authorized states where the state did not
act because the limited enforcement tools available to EPA at federal
facilities impeded the timely and effective resolution of enforcement
actions. Our report also noted that EPA regional officials were
reluctant to use negotiated compliance agreements at federal
facilities.
Testifying before the Congress in July 1993 on the Clean Water Act's
reauthorization, EPA's Assistant Administrator for Enforcement stated
that the agency agreed with the principle that the act should be
amended to prospectively waive the United States' sovereign immunity
from penalties for all violations of the act and also that federal
facilities should be subject to the same administrative compliance
orders and penalties as nonfederal parties. The Congress, however,
did not reauthorize the statutes and, hence, took no action on the
administration's proposals.
--------------------
\6 Water Pollution: Stronger Enforcement Needed to Improve
Compliance at Federal Facilities (GAO/RCED-89-13, Dec. 27, 1988).
AGENCIES LACK THE EXPERTISE TO
CONDUCT ENVIRONMENTAL AUDITS
---------------------------------------------------------- Chapter 4:3
Besides having weak incentives to undertake environmental auditing,
many civilian federal agencies lack the technical expertise necessary
to develop and implement environmental audit programs. According to
EPA's survey of the Civilian Federal Agency Task Force, environmental
training and experience are limited in many civilian agencies. In
addition, many civilian environmental officials indicated a strong
need for EPA's technical assistance on environmental auditing. Our
work confirms the need for technical assistance at BLM and FAA.
Opportunities exist, however, for EPA to deliver the necessary
technical assistance at low cost through cooperative efforts with
agencies that have already developed environmental audit training
programs and have demonstrated a willingness to share them with other
agencies.
AGENCIES NEED EPA'S
TECHNICAL ASSISTANCE
-------------------------------------------------------- Chapter 4:3.1
According to EPA's survey of civilian federal agencies, 80 percent of
these agencies have no formal environmental training programs. The
survey indicated a strong need for technical assistance from EPA to
improve agencies' environmental compliance programs, in general, and
to implement environmental auditing, in particular. Of the 21
agencies responding to the survey, 15 indicated that the need for
technical assistance from EPA in developing an environmental audit
program was critical, very important, or important.
Our findings at BLM and FAA confirm the need for technical assistance
at these agencies. At BLM, few staff have an environmental
background and environmental training is limited to a course on
managing hazardous materials. Similarly, a limited number of FAA
staff have environmental expertise. The agency has developed and
offered a few environmental courses (e.g. on asbestos, hazardous
materials, the National Environmental Policy Act, and due diligence
audits) in addition to providing locally arranged and conducted
training for staff. However, training needs exceed available
training resources. Several FAA regional environmental officials
expressed a desire for EPA to help them build the agency's
environmental compliance programs. The environmental manager of the
FAA Technical Center told us that if EPA wants to foster
environmental auditing in federal agencies, it must address the need
to build environmental expertise. A BLM field environmental official
echoed this view, stating that EPA should do more to explain to top
agency officials why their agencies need to do environmental
auditing, help agencies set up audit programs, and train agency
employees to conduct audits.
EPA CAN LEVERAGE ITS
TECHNICAL ASSISTANCE BY
ENLISTING THE HELP OF
EXPERIENCED AGENCIES
-------------------------------------------------------- Chapter 4:3.2
In its 1986 policy statement encouraging federal agencies to develop
environmental audit programs, EPA stated that "to the extent
feasible, [it would] provide technical assistance to help Federal
agencies design and initiate audit programs." In the late 1980s, EPA
took steps toward meeting this commitment. For example, in 1988 EPA
sponsored a nationwide Environmental Auditing Conference for federal
agencies, and in 1989 it issued guidelines to assist federal agencies
in establishing environmental audit programs. Also in 1989, EPA
issued a generic environmental audit protocol for use by federal
agencies.
Nonetheless, EPA officials acknowledge that, until recently, the
agency's technical assistance efforts were not very effective for
agencies that, like many civilian federal agencies, have limited
environmental expertise. In late 1994, EPA proposed a strategy aimed
specifically at improving environmental compliance programs at
civilian federal agencies. EPA's strategy includes (1) commissioning
the design of an environmental audit protocol and program guidelines
tailored to the needs of civilian agencies and (2) arranging a
conference and training session for early 1995 focusing on the
environmental auditing needs of these agencies.
EPA's recent technical assistance initiatives are encouraging.
However, our review indicates that civilian federal agencies will
require more sustained and regular training and outreach to acquire
the enhanced environmental expertise that they need. In providing
this assistance, EPA could draw upon the expertise of agencies that
have mature environmental audit programs and have demonstrated a
willingness to share their expertise with others. For example, in
1993, DOE offered training to civilian officials on the role of
environmental auditing in maintaining effective environmental
management systems. This example suggests the potential for EPA to
arrange cooperative efforts that could extend the environmental
expertise existing in some parts of the federal sector to the
civilian federal agencies.
Another concern about EPA's technical assistance is that it does
little to convince senior civilian managers of the value of
environmental auditing. In particular, it does not show them how
environmental auditing can help them ensure compliance with
environmental laws and avoid costly cleanups. EPA's efforts to
foster environmental auditing through building the audit expertise of
midlevel environmental officials will not be particularly effective
until senior managers are convinced of the benefits of environmental
auditing. To address this need, EPA will need to reach out directly
to the senior managers of civilian agencies.
Training senior managers is another area where EPA could draw on the
expertise of agencies that have experience with environmental
auditing. For example, the Air Force has developed a course for
senior officers on their environmental responsibilities and on the
benefits of the Air Force's environmental audit program (ECAMP). The
gist of the course and of the accompanying Commander's Guide is
captured in the following statement:
"The effectiveness of any program is determined largely by the
level of support it receives from those in authority. As
Commander, you are responsible for most of what happens on your
installation--including anything that damages our environment.
ECAMPs facilitate environmental compliance, which in turn,
reduces the risk of legal actions."
Air Force environmental officials told us that the course has been
instrumental in gaining Air Force managers' support for ECAMP. In
view of recent demonstrations by the Air Force that it is willing to
share its environmental expertise, a cooperative effort between EPA
and the Air Force might well be arranged to make similar training
available to senior managers in civilian agencies.
EPA POLICIES AND PRACTICES
DISCOURAGE ENVIRONMENTAL
AUDITING
---------------------------------------------------------- Chapter 4:4
EPA policies and practices on using audit reports for enforcement
purposes create additional disincentives to environmental auditing.
Both private and public officials agreed that environmental auditing
is encouraged by inspections and discouraged by requests from
regulators for audit reports, especially when the penalties for
violations discovered through audits are not reduced.
EPA IS INCONSISTENT IN
IMPLEMENTING ITS POLICY ON
REQUESTING AUDIT REPORTS
-------------------------------------------------------- Chapter 4:4.1
Because environmental audit reports are designed to identify
compliance problems, regulators may be motivated to request audit
results in the course of their enforcement work. EPA acknowledged in
its 1986 policy statement on environmental auditing, however, that
regulators' requests for audit reports could discourage the practice
of auditing. Consequently, EPA stated that it would not "routinely
request" audit reports but would do so only on a case-by-case basis
when the audit information was deemed necessary to accomplish a
"statutory mission" or the information was material to a criminal
investigation. EPA stated that it expected such requests to be
"limited." For federal facilities, EPA stated that its policy on
requests for audit reports would be the same as for other regulated
entities. EPA informed federal agencies, however, that Freedom of
Information Act (FOIA) provisions would apply to environmental audit
reports prepared by them, implying that the agencies might have
difficulty preserving the confidentiality of their audit reports.
The private sector has been concerned about EPA's policy on access to
environmental audits for many years. In July 1994, EPA offered an
opportunity for private sector organizations to present their views
on the policy and related matters. At a well-attended public
meeting, numerous company environmental officials testified that the
current EPA policy constitutes a strong disincentive to auditing.
The officials stated that because EPA's policy fails to adequately
protect audit reports from access by regulators, the policy has
produced a "chilling effect" that has impeded the audit efforts of
many companies and has discouraged other companies from undertaking
environmental auditing at all.
While private organizations suggest that EPA should provide stronger
assurance that it will not request audit reports, such assurance may
not be feasible in the federal government where audit reports are
subject to public disclosure under FOIA. However, federal
environmental officials still believe a major disincentive to
auditing is presented if EPA does not adhere to its stated policy of
requesting audit reports only in limited and specifically defined
situations.
Our past and current work demonstrates that concern about EPA's
requesting audit reports has discouraged federal agencies from
conducting environmental audits. A May 1986 GAO report on the slow
progress of civilian federal agencies in complying with regulatory
requirements for managing hazardous wastes discussed environmental
auditing as a means of improving federal agencies' compliance.\7
The report noted that environmental auditing was in limited use among
federal agencies and indicated that a key barrier to the
establishment of effective environmental audit programs was that
federal agencies were concerned about EPA's requesting audit reports.
More recently, Air Force officials told us that EPA has created
disincentives to environmental auditing by not adhering to its policy
of making only "limited" requests for audit reports. In 1993, an EPA
region sent a letter to all Air Force installations in the region
requesting "access to copies of recent (within the last two years)
environmental . . . assessments conducted by your higher
headquarters or by your own staff." While the Air Force was
ultimately able to deny EPA access to the reports, command officials
told us that if EPA wants to encourage environmental auditing, it
must closely adhere to a policy of asking for audit reports only
under exceptional circumstances. According to these officials, staff
will not be candid about environmental compliance if they suspect
that audit reports may end up in the hands of regulators.
Headquarters Air Force officials agreed that the most important thing
EPA can do to encourage environmental auditing is to refrain from
requesting audit reports.
--------------------
\7 Hazardous Waste: Federal Civil Agencies Slow to Comply With
Regulatory Requirements (GAO/RCED-86-76, May 6, 1986).
EPA'S POLICY GIVES LIMITED
ASSURANCE OF REWARD FOR
FINDING AND REPORTING
VIOLATIONS
-------------------------------------------------------- Chapter 4:4.2
Although its 1986 policy statement offers some assurance that it will
refrain from routinely requesting audit reports, EPA offers little
assurance that penalties for violations discovered through
environmental audits will be reduced. To the contrary, EPA's audit
policy states that entities are obligated to disclose violations
discovered through audits if the violations are otherwise reportable
under environmental statutes. The policy also encourages regulated
entities to report other violations, even if they are not legally
required to do so.
In return for being forthcoming about any violations discovered
through environmental audits, EPA's audit policy promises regulated
entities, both private and federal, only that, in determining its
enforcement response to violations, the agency "may exercise its
discretion" to "take into account" a facility's audit efforts. The
policy notes that such consideration will be provided only "when
regulated entities take reasonable precautions to avoid
noncompliance, expeditiously correct underlying environmental
problems discovered through audits or other means, and implement
measures to prevent their recurrence." The policy adds that when
federal agencies report violations, "even when not specifically
required to do so," EPA will review the audit findings and could be
expected to impose consent agreements.
Speakers at EPA's July 1994 public meeting made it clear that private
sector environmental officials are very concerned about EPA's policy
on responding to self-disclosed audit findings. Corporate officials
described instances in which companies had themselves detected and
reported violations, only to receive stiff fines from EPA and state
regulators. An officer of the Environmental Auditing Roundtable, the
largest professional environmental auditors' organization, stated
that EPA's current policy offers little assurance that a proactive
company that audits itself and reports a violation will be penalized
with any less severity than a company that ignores or hides its
violations until they are uncovered by regulatory inspectors.
Several officials recommended that EPA revise its policy to reward
the self-detection and disclosure of violations with explicit
assurance that penalties will be mitigated or waived.
Federal environmental officials, similarly, believe that EPA's
statements on the treatment of voluntarily discovered and reported
audit findings lack assurance of mitigation and present a
disincentive to environmental auditing. Our May 1986 report stated
that a key factor impeding the initiation of environmental audit
programs in federal agencies was concern about how EPA might use the
audit results. Our recent work confirms that federal environmental
officials continue to believe that EPA's policy on the treatment of
audit results discourages environmental auditing. Air Force
headquarters and Command officials told us that if EPA wishes to
encourage environmental auditing, it must provide clear assurance
that violations identified through environmental auditing will
receive some measure of regulatory relief--as long as the regulated
entity is actively correcting the problems.
DOE officials also told us that EPA's enforcement response to audit
reports serves as a disincentive to environmental auditing.
According to DOE headquarters officials, both EPA regions and state
regulators have used information generated by environmental audits to
initiate enforcement actions against DOE. While the DOE headquarters
officials stated that such use of audit reports does not help to
encourage environmental auditing, they said that they have come to
regard such actions simply as the price of being a public
organization. The environmental audit manager at a major DOE
facility we visited was less philosophical, however, stating that
"EPA is too quick to fine organizations for noncompliance, even when
they report violations themselves and are taking steps to correct the
problems."
Agencies that are just initiating an environmental audit program or
are considering doing so may experience the strongest "chilling
effect" from the prospect of having audit results used against them.
For example, in commenting on the proposed pilot environmental audits
at BLM, a headquarters environmental official warned that "the pilot
audit . . . report can be used for enforcement purposes by federal
or state environmental agencies." The BLM environmental audit
coordinator told us that concern about what EPA might do with audit
results has in fact discouraged BLM management from supporting
environmental auditing.
Since mid-1994, EPA has been formally gathering information to serve
as a basis for evaluating the possible need for changes in its policy
on environmental auditing. EPA officials involved in this effort
told us that they recognize there may be a need to integrate the 1986
audit policy more clearly and fully into the agency's overall
regulatory scheme, including--possibly--the need to forge a more
explicit link between the agency's audit policy and program penalty
policies. Consequently, these officials told us, they are
considering a wide range of policy options, including the option of
providing clearer assurance that the penalties for self-discovered
and self-reported violations will be reduced when certain criteria
are met.
Although EPA officials caution that they are not yet committed to any
specific policy changes, the agency's decision to reevaluate its
auditing and related policies is encouraging. As the private and
public sector audit communities have noted, EPA policies that call
for the voluntary disclosure of self-detected violations yet provide
only vague assurances of regulatory flexibility in return serve to
discourage rather than encourage environmental auditing. EPA has
acknowledged that environmental auditing contributes to its goal of
getting regulated entities to comply with environmental laws. It has
further acknowledged that its own resources for enforcing compliance
are quite limited. This combination of factors may serve to convince
the agency that reducing disincentives to environmental auditing
would be an effective and efficient means of advancing its compliance
objectives.
CONCLUSIONS
---------------------------------------------------------- Chapter 4:5
Our review identified a number of obstacles and disincentives to the
further development of environmental auditing in the civilian federal
sector. While the environmental audit community reports that strong
and explicit management support is essential to the success of
environmental auditing, senior managers in some civilian agencies
still need to be convinced that environmental auditing deserves their
support. However, civilian agency managers may see little need to
use environmental auditing to ensure compliance because,
historically, many agencies have had scant risk of having their
facilities inspected. Further development of environmental auditing
in the civilian sector is also impeded by a widespread lack of the
necessary environmental expertise. These obstacles are compounded by
EPA policies that encourage entities to disclose audit findings--and
potential violations--but offer little assurance that self-disclosure
will be rewarded by reductions in penalties.
We believe that changes to EPA and state regulatory programs and
policies could go a long way toward removing these obstacles and
disincentives. In particular, EPA and state inspection strategies
need to be refocused so that civilian federal agencies having
substantial environmental liabilities receive at least a minimal
level of inspection attention--enough to encourage appropriate
emphasis on achieving environmental compliance. Furthermore, EPA
will need to sponsor regular opportunities for sharing the energy and
defense agencies' expertise in environmental auditing with the
civilian agencies and for training senior agency managers in the
benefits of environmental auditing. Environmental auditing would
also be encouraged by the more consistent application of EPA's policy
on limiting requests for audit reports and by the explicit linking of
the agency's policies on environmental auditing and on penalties to
provide clearer assurance of reward for the use of proactive
environmental practices such as auditing.
RECOMMENDATIONS
---------------------------------------------------------- Chapter 4:6
To encourage the practice of environmental auditing in civilian
federal agencies, we recommend that the Administrator, EPA, take the
following actions:
Augment EPA's efforts to refocus federal and state inspection
strategies to ensure that civilian federal agencies receive a
measure of enforcement attention commensurate with the
environmental risks posed by their operations.
Provide regular and sustained technical assistance on environmental
auditing to civilian federal agencies (possibly through
cooperative arrangements with other federal agencies), with
particular emphasis on improving senior managers' awareness and
understanding of the benefits to be gained from environmental
auditing.
Require EPA regional offices to adhere to the agency's stated
policy that the agency will not "routinely request"
environmental audit reports but will confine such requests to
the exceptional situations outlined in its 1986 policy statement
on environmental auditing.
Revise EPA's environmental audit and related policies to encourage
regulated entities to self-discover, report, and correct
noncompliance by providing for the reduction of penalties for
violations identified through environmental auditing. This
consideration should be given only if the reporting entity meets
EPA's criteria of "taking reasonable precautions to avoid
noncompliance, expeditiously correcting underlying environmental
problems discovered through audits or other means, and
implementing measures to prevent their recurrence."
AGENCY COMMENTS
---------------------------------------------------------- Chapter 4:7
EPA agreed generally with GAO's recommendations on inspecting
civilian federal agencies and on providing technical assistance to
these agencies to promote the use of environmental auditing.
However, EPA questioned whether GAO had (1) persuasively shown that
EPA had departed significantly from its stated policy of not
requesting copies of audit reports except under limited circumstances
and (2) adequately demonstrated the need for EPA to revise its 1986
policy on environmental auditing to provide more explicit assurance
that penalties would be mitigated for self-discovered and
self-reported violations that were promptly corrected. While our
work did not identify many instances when EPA had departed from its
stated policy on requesting audit reports or had used audit findings
to penalize those who had voluntarily discovered, reported, and
corrected cases of noncompliance, we were told by many parties--as
was EPA during its July 27-28, 1994, public meeting on environmental
auditing--that the agency's current policies and practices are widely
perceived as discouraging the wider adoption of environmental
auditing by the regulated community and as threatening to those who
already use auditing as a tool to achieve and maintain compliance.
For these reasons, we continue to believe that the recommended
actions are needed.
ORGANIZATIONS WHOSE ENVIRONMENTAL
AUDIT PROGRAMS WERE EXAMINED
AND/OR THAT PROVIDED INFORMATION
ABOUT ENVIRONMENTAL AUDITING
=========================================================== Appendix I
CORPORATIONS
--------------------------------------------------------- Appendix I:1
Allied-Signal, Inc.
Amoco Corp.
AT&T
Browning-Ferris Industries
CH2M Hill
Duke Power Co.
Eastman Kodak Co.
E. I. DuPont de Nemours Co.
Florida Power & Light Co.
S. C. Johnson Wax
Lockheed Missiles & Space Co.
Meridian Oil Co.
Millipore Corp.
Olin Corp.
Pennsylvania Power & Light Co.
Polaroid Corp.
Procter & Gamble Co.
The Southern Company
Union Carbide
WMX Technologies Inc.
Xerox Corp.
AUDIT ORGANIZATIONS,
CONSULTANTS, AND PUBLIC
INTEREST GROUPS
--------------------------------------------------------- Appendix I:2
Arthur D. Little, Inc.
American National Standards Institute
American Society for Testing and Materials
Environmental Auditing Forum
Environmental Auditing Roundtable
Environmental Law Institute
Executive Enterprises
International Institute of Auditors
International Standards Organization
Institute for Environmental Auditing
Institute of Internal Auditors
NSF International
Mineral Policy Center
TRADE ASSOCIATIONS
--------------------------------------------------------- Appendix I:3
Chemical Manufacturers Association
Global Environmental Management Initiative
International Chamber of Commerce
U.S. GOVERNMENT AGENCIES AND
RELATED ORGANIZATIONS
--------------------------------------------------------- Appendix I:4
U.S. Air Force
Bureau of Land Management (BLM)
Department of Defense (DOD)
Department of Energy (DOE)
Department of the Interior (DOI)
Department of Transportation (DOT)
Environmental Protection Agency (EPA)
Federal Aviation Administration (FAA)
U.S. Sentencing Commission
White House, Office on Environmental Policy
AGENCIES PARTICIPATING IN THE
CIVILIAN FEDERAL AGENCY TASK FORCE
========================================================== Appendix II
Department of Agriculture*
Bureau of Prisons
Central Intelligence Agency*
United States Coast Guard*
Department of Commerce*
Economic Development Administration
Environmental Protection Agency*
Federal Aviation Administration*
Food and Drug Administration
General Services Administration*
Indian Health Services
Department of the Interior*
Department of Justice*
National Aeronautics and Space Administration*
National Oceanic and Atmospheric Administration*
National Security Agency*
United States Postal Service*
Tennessee Valley Authority
Department of Transportation*
Department of Treasury*
Department of Veterans Affairs
Responded to EPA's survey entitled Civilian Federal Agency
Environmental Program Needs. The following agencies within the
Department of Agriculture also responded to the survey: Agricultural
Marketing Service, Agricultural Research Service, Animal and Plant
Health Inspection Service, Federal Grain Inspection Service, Forest
Service, and Soil Conservation Service.
(See figure in printed edition.)Appendix III
COMMENTS FROM THE ENVIRONMENTAL
PROTECTION AGENCY
========================================================== Appendix II
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
The following are GAO's comments on the Environmental Protection
Agency's (EPA) letter dated February 6, 1995.
GAO'S COMMENTS
-------------------------------------------------------- Appendix II:1
1. We have revised our report, where appropriate, to reflect the
information on fiscal year 1994 civilian federal agency inspections
provided by EPA.
2. We have revised our discussion of EPA's technical assistance to
include information provided by EPA on its recent and planned
initiatives. The two initiatives EPA cites are, we believe, good
examples of the kind of technical assistance to executive branch
agencies that is called for in Executive Order 12088 and that will be
needed to promote the wider adoption of environmental auditing and
other proactive environmental management practices in the federal
sector. Such assistance, we believe, can complement and reinforce
other EPA actions we have recommended to increase agency managers'
attention to environmental compliance and good environmental
performance.
3. EPA is correct in stating that our draft report did not document
a widespread pattern of requests for audit reports in either the
public or the private sectors. Nevertheless, we were informed of
several examples, including the example of the Air Force audit
reports mentioned in the EPA comment. Moreover, we were told--as was
EPA in the course of its July 1994 public meeting on environmental
audit policy--that the agency is commonly perceived as not
consistently adhering to its stated policy on requests for audit
reports. This perception is reported to have diminished the
willingness of both private companies and many civilian federal
agencies that have not yet adopted environmental auditing to do
so--out of concern that audit reports could constitute the "smoking
gun" that regulators would seize on to penalize them for
noncompliance. To the extent that EPA is able to dispel such
concerns by reaffirming its 1986 policy on requests for audit
reports, we believe such an action would encourage the use of
environmental auditing by regulated entities. We have provided EPA
officials with information that should enable the agency to verify
the requests by an EPA regional office for the Air Force audit
reports discussed in our report.
4. We are aware of the agency's policies that provide for mitigating
the gravity component of a penalty in exchange for the voluntary and
prompt self-disclosure of an environmental violation. Indeed, we and
others have cited the often inconsistent interpretation and
application of these policies and penalty practices, which either
lower their deterrent value or allow repeated violations to go
unpenalized (see, for example, Penalties May Not Recover Economic
Benefits (GAO/RCED-91-166, June 17, 1991). However, the issue that
our report addresses is whether EPA needs to link its 1986
environmental audit policy more explicitly with its program penalty
policies. Our contacts during this review consistently pointed to
the need for EPA to modify its 1986 policy to remove an often cited
disincentive to the adoption of environmental auditing--the concern
on the part of many regulated entities that they will be penalized
for "doing the right thing" (i.e. that voluntarily conducting audits
and voluntarily reporting audit findings will expose them to
regulatory penalties with no explicit assurance of a reward for good
behavior.)
EPA officials involved in the ongoing reassessment of the agency's
1986 policy statement on environmental auditing acknowledged to us
that the policy has never been sufficiently integrated with EPA's
numerous enforcement and penalty policies. Rather, they noted that
the policy has, in a sense, stood in isolation, lacking explicit
linkage to the rest of the agency's regulatory scheme. It is just
such a linkage that we believe the agency needs to establish in order
to encourage the broader use of environmental auditing as a tool for
improving compliance and enhancing environmental performance.
5. We have revised the wording of our report to avoid giving the
impression that EPA has no policies permitting the mitigation of
penalties in return for the voluntary disclosure and prompt
correction of violations. As noted above, our point is that the
agency's environmental audit policy, as currently stated, provides
little assurance that such actions will be met with a measure of
regulatory relief.
6. We chose not to discuss these policies for several reasons.
First, these policies concern criminal violations rather than the
more common violations for which civil penalties would typically be
imposed. Second, these policies do not provide explicit assurance
that penalties will be reduced or waived in return for certain
actions on the part of regulated entities. Specifically, they offer
no reliable basis for a regulated entity to conclude that it would
benefit from taking reasonable precautions to avoid noncompliance,
expeditiously correcting underlying environmental problems discovered
through audits, and implementing measures to prevent their
recurrence. Instead, the Department of Justice's 1991 guidance and
EPA's 1994 guidance provide for prosecutorial and investigative
discretion. The U.S. Sentencing Commission's Environmental
Sentencing Guidelines, as noted in EPA's comments, are still in draft
form. Important and useful as these policies may be for other
purposes, our contacts with corporate and public agency officials
indicate that none provides the kind of explicit assurance of
regulatory relief needed to encourage the wider adoption of
environmental auditing by the regulated community.
7. EPA's comments on statements made by industry representatives at
the July 27-28, 1994, public meeting on environmental auditing note
that statements on audit privilege and/or penalty issues were
disputed by many state officials and by groups that testified. EPA
suggests that we review a transcript of the hearing to obtain a more
balanced picture of the views expressed. However, we found from
attending the 2-day public meeting and reviewing the transcript of
the meeting that most speakers clearly favored a change in the
agency's audit policy. Specifically, 47 out of 52 commenters on the
issue called for modifying the policy to provide greater assurance
that penalties would be reduced or waived in return for voluntarily
auditing, disclosing and promptly correcting violations.
8. It is not our contention that EPA is solely or even primarily
responsible for the obstacles and disincentives to environmental
auditing discussed in our draft report. Rather, we believe that EPA
is in the best position to devise solutions to the problems we
discuss and to provide the leadership needed to improve environmental
compliance and performance in the federal sector. EPA could provide
outreach and assistance to federal agencies to increase their
understanding of the benefits of proactive environmental management
practices, such as environmental auditing, and it could provide
incentives--as it has in the case of the benchmark agencies we
examined--for senior agency managers to be concerned about their
organizations' environmental compliance status and overall
environmental performance.
EPA is correct in noting that Executive Order 12088, dated October
13, 1978, designated the head of each agency as responsible for that
agency's compliance with applicable environmental laws. However, the
executive order did not mandate environmental auditing as the
mechanism for achieving compliance. In fact, the executive order
provided no guidance at all on how federal agencies are to achieve
and ensure compliance. Instead, it called upon the Administrator,
EPA, to provide technical advice and assistance to executive branch
agencies "to ensure their cost-effective and timely compliance with
applicable pollution control standards." Although EPA--as our report
acknowledges--has helped to promote the understanding and use of
environmental auditing by the regulated community, the agency can, in
our view, do more to promote the acceptance and use of this tool in
the federal sector.
9. We concur with EPA's position that environmental management
standards would provide a sound, uniform foundation on which federal
agencies might construct comprehensive, proactive environmental
programs tailored to their needs--programs that would include
environmental auditing as an important component. Hence, we support
EPA's efforts to develop such standards as part of its Federal
Government Environmental Challenge Program and find these efforts
consistent with the leadership role that we believe EPA should play
in promoting improved environmental performance on the part of
federal agencies. At the same time, pending the development of a
"Federal Code of Environmental Principles," we believe that agencies
can take a number of immediate steps to improve their environmental
performance. As our report discusses, many private sector
organizations and a few federal agencies, including DOE and DOD, have
already realized substantial benefits--among them improved compliance
with environmental laws and reductions in exposure to liability--as a
result of environmental audit programs implemented in the absence of
consensus standards.
It has taken many years' experience with environmental regulation and
environmental auditing for national and international organizations
in the private sector to begin forging a consensus on voluntary
environmental management standards. While the federal sector can no
doubt benefit from this pioneering experience, the task of developing
such standards for federal agencies will not be accomplished
overnight. We believe EPA's leadership in this effort, as described
in the agency's response, will be critical to the rate of progress
and the end result. Meanwhile, we believe EPA needs to encourage
agencies to develop and implement basic environmental audit programs
and other activities designed to improve their environmental
performance.
10. To some extent, our report does address the use of audits to
identify and reduce environmental and safety risks. For example,
under the heading "Environmental Auditing Can Reduce Environmental
Hazards" we discuss how audits can be used to identify avoidable
risks posed by facilities' current practices and procedures and
reduce the potential for environmental harm through the substitution
or elimination of materials currently used in facilities' operations
and maintenance. However, our report does not specifically discuss
pollution prevention audits because we found that there is less
widespread understanding and agreement regarding this more innovative
type of audit than there is regarding compliance audits and audits of
environmental management systems. Furthermore, our review found that
most civilian federal agencies are only in the earliest stages of
developing compliance assurance and environmental performance
management systems. These agencies, we believe, will need to enhance
employees' awareness of environmental requirements, develop
appropriate environmental management systems, assess basic compliance
with environmental requirements, and generally enhance their
environmental expertise and competence before they adopt more
advanced tools, such as pollution prevention audits.
11. We have revised the report's language, as suggested by EPA, to
emphasize that environmental auditing is not a simple, mechanical
exercise, but one that requires trained, qualified personnel who must
be able to exercise professional judgment and evaluate the
environmental implications of site-specific conditions, including
facilities' processes and practices. In chapter 1 of the report,
under the heading "A Tool for Ensuring Compliance," we recognize that
an effective and comprehensive environmental management program, as
distinguished from audits at individual facilities, cannot be
achieved overnight but must be developed gradually and systematically
over time.
12. See comments 3 and 4.
13. See comment 1.
14. We have revised the discussion in chapter 1, under the heading
"Early Efforts to Promote Environmental Auditing," to mention the two
documents cited by EPA as examples of the technical assistance it
provides to promote federal agencies' use of environmental auditing.
15. In our view, listing individual agency officials or corporate
environmental officers would seldom serve a useful purpose.
Frequently, the comments quoted or the views expressed in the draft
report were merely representative of similar comments and views
expressed by a number of different sources. Finally, whether
obtained from publications or from interviews conducted by evaluators
during our reviews, quotations and attributed statements are always
carefully checked and verified as part of our internal report review
process.
16. The scope of this assignment did not include recommending
actions to particular executive branch agencies on how to ensure
compliance and improve environmental performance. Neither did it
include evaluating the Bureau of Land Management's (BLM) legal
authorities and responsibilities under the Federal Land Policy and
Management Act (FLPMA) and other statutes to require the adoption of
environmental auditing and other proactive environmental measures by
users of BLM-managed lands. We note that EPA and BLM officials
disagree over BLM's authority and responsibility to require such
measures on the part of its tenants and believe that this
disagreement should be resolved through consultations between the two
agencies and other interested parties.
17. We have revised our report to reflect the organizational change
EPA noted in its comment.
18. We recognize that enforcement and inspection are
responsibilities shared by EPA and state environmental regulatory
agencies, and our report acknowledges the need for state regulators,
as well as EPA, to ensure that civilian federal agencies receive an
appropriate measure of inspection attention. We have revised the
wording of our recommendation to highlight more clearly the role we
believe EPA should play in providing guidance and leadership in this
area. We believe, as EPA's November 1988 Federal Facilities
Compliance Strategy makes clear, that even when programs have been
delegated, the agency retains important authority and
responsibilities in the areas of inspection and enforcement. As
noted in the compliance strategy, EPA is in a position, through
annual meetings with states on federal facilities' compliance and
through other means, to coordinate strategies on the inspection of
federal facilities and to influence the amount of enforcement
attention that state authorities devote to such facilities. As
discussed in chapter VII of the compliance strategy, state/EPA
enforcement agreements--negotiated multiyear agreements that are
reviewed annually on a state-by-state basis for each environmental
program--are a particularly apt formal mechanism for this purpose.
19. The wording of our report has been revised along the lines
suggested by EPA.
20. See comments 1, 2, 3, 4 and 5.
21. We have revised the wording of our report to clarify that EPA's
1986 audit policy merely advised federal agencies that Freedom of
Information Act (FOIA) provisions would apply to environmental audit
reports prepared by them.
22. We have revised the wording of our report to make it clear that
we are recommending that EPA integrate its environmental audit policy
with its various enforcement and penalty policies to provide clearer
and more reliable assurance to the regulated community that penalties
for violations discovered, reported, and corrected as a result of
environmental auditing will be reduced or waived.
(See figure in printed edition.)Appendix IV
COMMENTS FROM THE DEPARTMENT OF
ENERGY
========================================================== Appendix II
(See figure in printed edition.)Appendix V
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix II
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)
(See figure in printed edition.)Appendix VI
COMMENTS FROM THE DEPARTMENT OF
TRANSPORTATION
========================================================== Appendix II
(See figure in printed edition.)
(See figure in printed edition.)
The following are GAO's comments on the Department of
Transportation's (DOT) letter dated February 1, 1995.
GAO'S COMMENTS
-------------------------------------------------------- Appendix II:2
1. We have revised our report, where appropriate, to clarify and
update our discussion of FAA's environmental audit program and of
management's support for and involvement in the program, on the basis
of information provided by DOT/FAA after reviewing our draft report.
2. We recognize that statements made to us by particular individuals
about environmental compliance do not necessarily characterize the
views of the majority of FAA employees and managers and do not
necessarily reflect official policy on compliance. We included
statements in our discussion primarily to show that employees'
sensitivity to environmental considerations and awareness of
environmental compliance responsibilities often need to be increased.
3. See comment 1.
4. See comment 1.
5. See comment 1.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix VII
RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C.
Steven L. Elstein, Assistant Director
Ralph L. Lowry, Evaluator-in-Charge
Patricia J. Manthe, Staff Evaluator
Valerie A. Paquette, Staff Evaluator