Environmental Auditing

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Why Audit?
• Improve environmental
compliance.
• Determine liabilities.
• Minimize corporate liabilities.
• Ensure profitable future.
• Minimize liabilities for:
- Share holders
- Stake holders
2/29/2016 Free template from www.brainybetty.com
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Why Audit?
• Improve processes.
• Minimize liabilities for corporate
officers.
• Determine future expenses and costs.
• Improve savings.
• Improve functionality.
• Improve Public Image.
• Enhancement of regulatory relations.
3

2/29/2016
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2/29/2016
Impact on Regulated
Community
5

Defining Environmental Audits
• Multi-Media
- All Envt. Regulations
- Full Review &
Disclosure.
- System Analysis.
- ISO
- QA/QC
• Media Specific
- Very focused.
- One statute or law
- One envt. Medium
(i.e., air, land, water)
- Site specific.
- Trend Analysis
throughout
complex/corporation.
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Advantages vs. Disadvantages
• Better compliance
• Fewer surprises
• Fewer fines
• Better public relations
• Potential cost savings
• Improved information
transfer
• Increased
environmental
awareness.
• Commitment of
resources.
• Temporary distribution
.
In
production/operations.
• Increased information
to fine or bring law-suits
• Increased liability
• Opening up corporate
weaknesses.
7

•
ACCOUnGUlt street gang"
8

Real Reasons to Audit is:
·VSCA (Verify Adequate System
Competently Applied)!
• [)()~~T ~V~I:? r=()I:?f7~T!
•§ystems always think
system in-place. Always!
9

EPA Policy on Audits
• Comply or DIEI
• Enforcement of
administrative laws
resulting in record
penalties and fines.
• Come to Jesusl
• Let's sit-down and
reason with one
another.
• Convert into a Good
Corporate Citizenl
• Some fines, but can
repent.
• The repenting can
hurtl
10

EPA Encourages Envt Auditing
• Full disclosure.
• Programmatic compliance
• Limited fines
• Improved public image
• Good faith effort
• Less litigation and more cooperation.
11

Attorney-Client Privilege
• If possible - always conduct audit
under attorney client privilege.
• Establish a buffer in possible.
• Full disclosure under attorney client
privilege.
• Work with regulators
• Invite them in and make them part of
the family - sort of...
12

EPA States
• Corporate manager are responsible.
• Part of mitigating factors during sentencing.
• Judge is required to take into consideration.
• Creates environmental insensitive.
• Creates environmental partnership.
• EPA will NOT dictate or interfere.
• EPA will NOT mandate auditing?
• ISO 14001 - want to do business?
• Voluntary Basis - goes along way.
13

, j
b
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fl!4JJ
Hit's another corporale lawyer... do we wanl to buy a soul?"
14

Elements of Effective Audit
Program
• Explicit top management support.
• Independent of operations.
• Independent of audited activities.
• Attorney client privilege
• Adequate team staffing and support
• Adequate auditor training
• Explicit audit objectives, scope, goals
clearly stated with frequency of audits
15

Program
• A process which collects, analyzes,
interprets and documents information
sufficient to achieve auditing objectives.
• (put your money where your mouth is)!
• Process includes specific procedures
and instruction - do not deviate.
• Report directly to senior management.
• Top down flow (senior management to
bottom feeders).
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Program
• Mechanism that creates:
- Clear reports.
- Prompt (don't water it down)
- Concise (to the point)
- Corrective actions and resources clearly
provided to remedy situations of non-
compliance.
- Don't shoot the messenger!
- Accurate, Thoroughness, and Quality!
2/29/2016 Free template from www.brainybeUy.com
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Confidentiality?
• Audits produce information or opinions
that may, if revealed, could be harmful
for your company.
• Certain underlying facts can never be
protected from disclosure.
- Establish attorney client privilege.
- Eventually the veil will be pierced! Its just a
matter of time.
- Release under your terms.
18

Protect the company through
audit process by:
• Senior management support.
• Conducted through Counsel.
• Memorandum from senior management to legal
counsel directing:
- Audit by conducted.
- Conducted through counsel.
- Obtain legal advise.
- Information is to be held confidential and privileged.
- Litigation is anticipated (asserting the basis for this
assumption) this is important.
- All notes are to be logged in the attorney's bound journal.
- A similar memorandum from Counsel to Consultant if they
are used.
19

audit process by:
• Counsel directly retains consultants -
inserting a buffer or barrier.
• ALL written communication are labeled
in the following manner:
- "privileged and confidential" and add the
words "do not duplicate"
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audit process by:
• ALL written communications are kept in
separate secured files under the control
of counsel.
• Distribution of the report is on a need-
to-know basis.
• An oral audit brief is considered only in
especially sensitive situations (for
maximum protection of information)
always exceptions.
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LiabiIities
• Cooperation & Officers.
• Envt statutes impose
reporting, record
keeping, documentation
of compliance.
• Failure to submit,
report, document,
falsify, hide, obscure.
• Willfully and Knowingly!
• Auditors/assessment
Team.
- Errors & Omissions.
- Falsifying and hiding
- Water down findings
- Obfuscate/confuse
- Lie
- Remiss
- Failure to obtain, report,
find, discover.
- Destroy
- Intimidate, etc.
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Planning the program Nuts
and Bolts.
• Program objectives:
- Assurance of compliance.
- Management of liabilities
- Making management accountable
- Tracking of compliance costs.
- Commitment of monies and resources.
23

Planning the program Nuts
and Bolts.
• Organization of the program
- Corporate control with full-time auditors
- Consultants anyone?
- A small corporate oversight group?
24

Management issues
• Expectations of senior management.
• Measures of successful performance.
• Unannounced audits (this is a key)
• Reporting protocols
• Supportive vs. combative style (this will
make you or break you as a cooperate
auditor)
• Is your hat white, gray or black?
25

Legal Issues
• Written vs. oral reports.
• Retained documentation - how much?
• Corporate counsel involvement?
• Watch the stinky attorneys!
• Protection from discovery.
• Report format and watchwords
• Language
• Offer recommendations? (be careful).
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Program coverage
• Frequency of audits/assessments
• All regulations/some regulations
• All plants/some plants/random sample
• Past practices
• Vendor audits (always)
• Waste contractor audits (always)
27

Process Issues
• Pre-visit questionnaire
• Number of auditors/field of expertise.
• Duration of audit
• Pre-visit, on-site, post-site activities.
• Sampling procedures/QA/QC
• Interview techniques (open ended questions)
• Inspection procedures.
• Use of portable computers/lab-tops/I-pads.
28

Auditor Selection and Training
• Skills required?
• Attorney's role with auditors
• Training procedures
• Full-time vs. part-time vs. consultants.
29

Tools
• Pre-visit questionnaire.
• On-site coordinator (very critical)
• Wind Shield Tour.
• Be ware of the guided tour.
• Compliance checklists Uust checklists)
• Programmatic vs. systemic.
• Regulatory updates
• Audit reports (past, present & future)
• Guidance/procedure manual
• Follow up reports and visits
• Computer support
• Division of duties
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Conducting the Audit
• Pre-Audit Activities
- Organize team
- Determine scope of audit
- Submit pre-audit questionnaire
- Establish on-site coordinator.
- Develop detailed agenda
• Interviews (who, what, where, why, how, when)
• Review regulations and assigned leads.
• Review records previously requested.
31

Conducting the Audit
• On-site Activities:
- Meet and greet
- Layout the rules of engagement
- Observe throughout entire process
- Records review on-site continued.
- Wind-Shield Tour.
- Assign duties to On-site Coordinator.
- Conduct Walk-Down
- Convene - write down and summarize
- Reacquire target.
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2/29/2016
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On-site
• Conduct interviews:
- Open ended questions.
- Focus on key-players.
- Pull-the-String
- Follow-up on what you found, heard, and
discovered.
- Use your checklist - to remember!
- Observe (compare, contract, records, logs)
- Maintain photo log (be careful)
- Close on positive note - if possible.
- Your baby is ugly!!!!!
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Post-Site/Audit Activities
• Review and follow-up while still fresh.
• Completed document review
• Request additional documents
• Make plans for future visits or interviews if necessary.
• Outline audit report
• Assign duties to write report
• Establish format - stick to it.
• Involve legal or senior management if required.
• Write Draft Report
• Agree to findings, concerns, recommendations.
• What is your audit criteria? How are you going to rank your finding.
• What your words, wordsmithing,
• What are the requirements.
• Liabilities worth reporting to management or counsel?
• Submit report - follow agreed to protocol
• Provide debrief of audit activities.
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Environmental Auditing

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