Regulatory Reform: Implementation of Selected Agencies' Civil Penalty
Relief Policies for Small Entities (Letter Report, 02/20/2001,
GAO/GAO-01-280).
One of the ways that federal regulatory agencies enforce applicable
statutes and regulations is through the imposition of civil monetary
penalties for violations of those statutes and regulations. The amounts
of the penalties imposed can vary substantially, depending on the limits
specified in the applicable statutes or regulations and the degree to
which the agencies impose the maximum fines permitted. Congress provided
agencies with substantial discretion in developing their Small Business
Regulatory Enforcement Fairness Act (SBREFA) policies. Not surprisingly,
the agencies used that discretion and developed policies that vary
substantially. The agencies also varied in how key terms were defined
and in their policies' conditions and exclusions. This variability
notwithstanding, all of the agencies' policies and programs that GAO
reviewed were within the discretion afforded to them by the SBREFA
Agencies were allowed to limit the scope of their programs to only a
portion of their enforcement actions against small entities, and they
could decide not to give small entities any additional penalty relief.
Agencies were also allowed to establish whatever conditions or
exclusions they wanted for participation in their programs, subject to
the requirements and limitations in other statutes.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: GAO-01-280
TITLE: Regulatory Reform: Implementation of Selected Agencies'
Civil Penalty Relief Policies for Small Entities
DATE: 02/20/2001
SUBJECT: Reporting requirements
Statutory law
Small business
Waivers
Fines (penalties)
Regulatory agencies
Law enforcement
Noncompliance
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GAO-01-280
A
Report to the Chairman, Subcommittee on Oversight of Government Management,
Restructuring, and the
District of Columbia, Committee on Governmental Affairs, U. S. Senate
February 2001 REGULATORY REFORM
Implementation of Selected Agencies' Civil Penalty Relief Policies for Small
Entities
GAO- 01- 280
Lett er
February 20, 2001 The Honorable George V. Voinovich Chairman, Subcommittee
on Oversight of Government Management, Restructuring, and the District of
Columbia Committee on Governmental Affairs United States Senate
Dear Mr. Chairman: One of the ways that federal regulatory agencies enforce
applicable statutes and regulations is through the imposition of civil
monetary penalties for violations of those statutes and regulations. The
amounts of the penalties imposed can vary substantially, depending on the
limits specified in the applicable statutes or regulations and the degree to
which
the agencies impose the maximum fines permitted. In 1996, Congress passed
the Small Business Regulatory Enforcement Fairness Act (SBREFA) (5 U. S. C.
601 note), which was intended to, among other things, “create a more
cooperative regulatory environment among agencies and small businesses that
is less punitive and more solution- oriented.” Section 223 of SBREFA,
entitled “Rights of Small Entities in Enforcement Actions,”
requires agencies to provide small entities (a small business, a small
government, or a small organization) with some form of relief from civil
monetary penalties. Specifically, subsection 223( a) of SBREFA required
federal agencies regulating the activities of small entities to establish a
policy or program by March 29, 1997, for the reduction and, under
appropriate circumstances, the waiver of civil penalties by small entities.
Subsection 223( c) of the act required agencies to submit a one- time report
to four congressional committees by March 29, 1998, on the scope of their
programs or policies, the number of enforcement actions against small
entities that qualified or failed to qualify for the SBREFA program or
policy, and the total amount of penalty reductions and waivers. 1 You asked
us to examine the implementation of section 223 of SBREFA and issues related
to civil penalty enforcement in selected agencies. 1 The four committees to
which agencies were required to submit reports are the Senate Committee on
Governmental Affairs, the House Committee on the Judiciary, and the House
and Senate Committees on Small Business.
Specifically, you asked us to (1) describe the similarities and differences
in the selected agencies' policies or programs under subsection 223( a) of
the act; (2) determine how many civil penalty enforcement actions each
selected agency had initiated against small entities in each fiscal year
since SBREFA's enactment, and how many of those actions resulted in some
kind
of penalty relief (either a waiver or penalty reduction); and (3) determine
whether any of the civil penalty enforcement actions that did not result in
penalty relief involved paperwork requirements and, if so, why a waiver or
penalty reduction was not provided in those cases. We focused our review on
five federal agencies that have civil monetary penalty authority, appeared
to have developed a large number of rules affecting small entities,
and were of interest to the Subcommittee: the Environmental Protection
Agency (EPA), the Federal Communications Commission (FCC), the Immigration
and Naturalization Service (INS) within the Department of Justice (DOJ), and
the Occupational Safety and Health Administration (OSHA) and the Mine Safety
and Health Administration (MSHA) within the Department of Labor (DOL).
Results in Brief The five agencies identified eight penalty reduction and
waiver policies as
implementing section 223( a) of SBREFA. All of the agencies' policies are
within the discretion afforded by SBREFA, but the agencies' policies vary
substantially between, and sometimes within, the agencies. Some of their
policies are specifically directed at small entities or give small entities
special consideration, but others treat small entities the same way they
treat large entities. Some of the policies apply to all of the agencies'
enforcement actions involving small entities, but others cover only a
portion of those actions. For example, two of EPA's section 223 policies
apply only to violations that are voluntarily disclosed by a small entity,
but do not apply to other agency enforcement actions (which also may result
in penalty relief). The agencies' policies also differ regarding how key
terms
such as “small entity” and “penalty reduction” are
defined, how the policies' penalty relief provisions are triggered, and
their conditions for and exclusions from penalty relief. The agencies
indicated that none of their policies were developed because of SBREFA, and
that most of the policies were established before the act took effect. All
but two of the policies have been published in the Federal Register and/ or
the Code of Federal Regulations.
MSHA was the only one of the five agencies that provided all of the data
required by subsection 223( c) of SBREFA in the agencies' 1998 reports to
congressional committees. MSHA was also the only agency that was able to
provide us with data for each year since the enactment of SBREFA on the
number of enforcement actions against small entities, the number that
resulted in penalty relief, and the dollar value of the relief provided.
(SBREFA does not currently require agencies to maintain this information.)
The other agencies either (1) provided data on the number of inspections of
small entities' facilities or the number of small entities that were
involved in their section 223 programs (both of which may be different from
the
number of enforcement actions involving small entities); (2) said they could
only provide data on the number of enforcement actions initiated against
entities of any size, not just small entities; or (3) provided data that
were inconsistent and incomplete. Because MSHA was the only agency that
identified the number of
enforcement actions against small entities that did not result in penalty
relief, it was also the only agency that identified the number of such
actions that involved paperwork requirements. (SBREFA does not currently
require agencies to maintain this information.) MSHA indicated that, in each
fiscal year since the enactment of SBREFA, less than 9 percent of its
enforcement actions without penalty relief involved paperwork requirements.
MSHA officials said that most of these actions imposed single $55 fines that
were required by regulation or involved more serious violations that could
have an impact on the health and safety of employees. OSHA indicated that
all of its inspections involving small entities resulted in some form of
penalty relief under the agency's section 223 policy. FCC and INS officials
said they could not provide data on enforcement actions involving small
entities because their agencies do not provide special civil penalty relief
based on the size of the regulated entity. EPA officials said the agency's
data systems do not distinguish between violations involving
paperwork requirements and nonpaperwork requirements. If Congress wants to
strengthen civil penalty relief for small entities, it should consider
amending section 223 of SBREFA to require that agencies' policies or
programs (1) provide small entities with more penalty relief than other
similarly situated entities and (2) cover all of the agencies' civil penalty
enforcement actions involving small entities. Also, to facilitate
congressional oversight in this area, Congress should consider amending the
act to require agencies to maintain data by fiscal year or some other time
period on such factors as the number of enforcement actions
involving all small entities, the number of enforcement actions that
resulted in penalty reductions, and the amount of penalty relief provided.
Any such data should clearly indicate how the agencies defined key terms
such as “small entity” and “penalty reduction.”
Background Small businesses are a significant part of the nation's economy,
accounting (under SBA's definition) for 99 percent of all businesses, about
50 percent of the gross domestic product, and about 53 percent of private
industry's workforce. Small governments make up 97 percent of all of the
local governments in the United States. However, small businesses and
governments can be disproportionately affected by federal agencies'
regulatory requirements, and agencies may inadequately consider the impact
of those requirements on small entities when the requirements are
implemented. 2 In response to concerns about the effect that federal
regulations may have on small entities, Congress passed the Regulatory
Flexibility Act (RFA) in 1980 (5 U. S. C. 601- 612). The RFA requires
federal agencies to analyze the anticipated effects of rules they plan to
propose on small entities unless they certify that the rules will not have a
“significant economic impact on a
substantial number of small entities.” We have reported several times
on the implementation of the RFA, noting areas in need of improvement. 3
On March 29, 1996, Congress passed SBREFA to, among other things, strengthen
the RFA's protections for small entities and “create a more
cooperative regulatory environment among agencies and small businesses
that is less punitive and more solution- oriented.” Subsection 223( a)
of SBREFA directed each federal agency regulating the activities of small
entities to establish a policy or program by March 29, 1997, “to
provide for the reduction, and under appropriate circumstances for the
waiver, of civil penalties for violations of a statutory or regulatory
requirement by a small
entity.” Subsection 223( b) identifies certain “conditions and
exclusions” that agencies' policies or program could include (e. g.,
requiring the small entity to correct the violation within a reasonable
period of time and excluding violations that pose serious health, safety, or
environmental threats). Although the agencies' policies and programs were
required to contain conditions and exclusions (subject to the requirements
or limitations in other statutes), agencies were not required to include the
2 Thomas D. Hopkins, A Survey of Regulatory Burdens, June 1995 report to the
Small Business Administration; and Senate Report on the Unfunded Mandate
Reform Act of 1995, Report 104- 1, January 11, 1995, Committee on
Governmental Affairs. 3 See, for example, Regulatory Flexibility Act:
Inherent Weaknesses May Limit Its Usefulness for Small Governments (GAO/
HRD- 91- 61, Jan. 11, 1991); Regulatory Flexibility Act: Status of Agencies'
Compliance (GAO/ GGD- 94- 105, Apr. 27, 1994); and Regulatory Flexibility
Act: Agencies' Interpretations of Review Requirements Vary (GAO/ GGD- 99-
55, Apr. 2, 1999).
conditions and exclusions listed in the subsection and were not limited to
those listed. Subsection 223( c) required agencies to submit a one- time
report to four specific congressional committees by March 29, 1998, on (1)
the scope of their programs or policies, (2) the number of enforcement
actions against small entities that qualified or failed to qualify for the
programs or policies, and (3) the total amount of penalty reductions and
waivers. Comments by the drafters of SBREFA at the time the act was passed
underscore the discretion that agencies have in the development and
implementation of their section 223 programs and the degree to which
agencies can use existing programs to satisfy the act's requirements. Their
statement, entitled the “Joint Managers Statement of Legislative
History
and Congressional Intent,” says that “[ e] ach agency would have
the discretion to condition and limit the policy or program on appropriate
conditions,” and “it is up to each agency to develop the
boundaries of their program and the specific circumstances for providing for
a waiver or reduction of penalties.” 4 The statement also noted that
“[ s] ome agencies
have already established formal or informal policies or programs that would
meet the requirements of this section” and specifically referred to
EPA's small business enforcement policy in this regard. The enactment of
SBREFA marked the second time in less than a year that agencies had been
encouraged to provide penalty relief to small businesses. In April 1995,
President Clinton, by memorandum, directed the heads of 27 departments and
agencies to modify the penalties for small businesses in certain situations
“to the extent permitted by law.” 5 For example, the memorandum
said agencies “shall exercise their enforcement discretion to waive
the imposition of all or a portion of a penalty when the
violation is corrected within a time period appropriate to the violation in
question.” The memorandum also required each agency to submit a plan
to the Director of the Office of Management and Budget (OMB) describing the
actions the agency would take and said the plan must provide that the agency
will implement the policies on or before July 14, 1995. It also said that
the plans should identify how notification of the agencies' policies will be
given to frontline workers and small businesses.
4 Cong. Rec. S3243 (daily ed., Mar. 29, 1996). 5 The memorandum was directed
to the heads of all of the agencies in this study with the exception of FCC,
which is an independent regulatory agency.
We have recognized in previous reports that enforcement is an important
element of regulatory management and civil penalties are important to
agencies' enforcement efforts. For example, in a 1996 report on the Clean
Water Act we said “penalties play a key role in environmental
enforcement by deterring violators and by ensuring that regulated entities
are treated
fairly and consistently so that no one gains a competitive advantage by
violating environmental regulations.” 6 In another report, we said
civil monetary penalties “are potentially a strong deterrent” to
noncompliance
with nursing home regulations, and we also said those penalties “have
potential to provide the necessary incentives to ensure continued
compliance.” 7 However, some Members of Congress have become concerned
about the impact that civil penalties can have on small businesses and other
small entities, particularly for infractions that may be relatively minor in
nature. During the 105th Congress, the House of Representatives approved
legislation that would have required federal regulatory agencies, in certain
circumstances, to suspend civil fines on small businesses for first- time
paperwork violations so that the small businesses could correct the
violations. 8 Similar legislation was introduced in the Senate but was not
enacted. 9 In commenting on this proposed legislation, EPA and other
agencies indicated that information collection requirements are the
foundation of many health and safety statutes, and that violations of those
requirements should not automatically be treated as a minor infractions
meriting a waiver of civil penalties. In testimony before the Senate
Committee on Governmental Affairs, the Administrator of the Office of
Information and Regulatory Affairs within OMB said the Clinton
administration strongly opposed the Senate bill, noting that “[ w] e
already have a powerful tool designed to give protection to small business
owners”- section 223 of SBREFA. The Administrator said that OMB was
not aware of any significant problems with the implementation of section
223. However, he also said that if there are “gaps” in section
223 that need correction, OMB would be willing to help craft an appropriate
amendment.
6 Water Pollution: Many Violations Have Not Received Appropriate Enforcement
Attention (GAO/ RCED- 96- 23, Mar. 20, 1996). 7 Nursing Homes: Additional
Steps Needed to Strengthen Enforcement of Federal Quality Standards (GAO/
HEHS- 99- 46, Mar. 18, 1999). 8 H. R. 3310, the “Small Business
Paperwork Reduction Act Amendments of 1998.” 9 S. 1378, the
“Small Business Paperwork Reduction Act Amendments of 1999.”
Objectives, Scope, and The objectives of our review were to (1) describe the
similarities and
Methodology differences in the selected agencies' policies or programs under
subsection
223( a) of SBREFA; (2) determine how many civil penalty enforcement actions
each selected agency had initiated against small entities each fiscal year
since SBREFA's enactment and how many of those actions resulted in some kind
of penalty relief (either a waiver or penalty reduction); and (3) determine
whether any of the civil penalty enforcement actions that did not result in
penalty relief involved paperwork requirements and, if so, why a waiver or
penalty reduction was not provided in those cases.
To identify the agencies included in our review, we examined the October
editions of the Unified Agenda of Federal Regulatory and Deregulatory
Actions for fiscal years 1997, 1998, and 1999 to identify the agencies that
most frequently appeared to issue rules with a significant economic impact
on a substantial number of small entities. 10 Ten departments and agencies
had at least 50 entries in at least 1 of these editions of the Unified
Agenda- EPA; FCC; and the Departments of Agriculture, Commerce, Health and
Human Services, the Interior, Justice, Labor, Transportation, and the
Treasury. On the basis of the Subcommittee's interests, we selected EPA,
FCC, DOJ, and DOL for inclusion in the review. Within DOJ and DOL, we
identified the agencies that accounted for most of the departments' totals-
INS within DOJ and MSHA and OSHA within DOL. We then confirmed that each of
the five agencies selected had civil penalty authority. To address the first
objective of describing the similarities and differences
in the selected agencies' policies, we obtained a copy of the report that
each of the agencies submitted in 1998 pursuant to subsection 223( c) of
SBREFA from the Senate Committee on Small Business. We also obtained copies
of each agency's policies and reports from the agencies or through the
Internet. We reviewed the agencies' policies and policy descriptions in
their reports, noting areas of similarity and difference (e. g., whether the
agencies' policies provided civil penalty relief for small entities and the
scope of the policies' coverage). We then clarified, where appropriate, our
characterizations of the agencies' policies with agency officials. 10 The
Unified Agenda is published twice each year in the Federal Register by the
Regulatory
Information Service Center and provides uniform reporting of data on
regulatory activities under development throughout the federal government.
We also attempted to use the agencies' subsection 223( c) reports to address
the second objective- determining how many civil penalty enforcement actions
the agencies had initiated and how many resulted in penalty relief. However,
two of the reports did not contain any enforcement data, and in two other
cases the data were not presented in the manner specified in the statute or
consistent with our objective. Therefore, we asked officials in each
selected agency to identify how many civil penalty enforcement
actions the agency had initiated against small entities each fiscal year
since SBREFA's enactment (i. e., fiscal years 1997, 1998, 1999, and 2000),
and how many of those actions in each year resulted in some penalty relief
and no penalty relief.
To address our third objective regarding paperwork requirements, we asked
the agencies to identify how many of the enforcement actions against small
entities that resulted in no penalty relief involved a
paperwork requirement. We also asked the agencies to explain why those
paperwork- related actions did not result in civil penalty relief. We
defined a “paperwork requirement” as involving a collection of
information approved by OMB pursuant to the Paperwork Reduction Act of 1995.
This review focused on five selected agencies and cannot be used to
characterize the SBREFA programs or policies in other agencies. However, we
believe these agencies' programs and policies illustrate the variation in
such policies among agencies with a significant regulatory impact on small
entities. We did not validate the reliability of the enforcement data that
agencies provided. We conducted our review between August 2000 and December
2000 in accordance with generally accepted government auditing standards.
We provided a draft of this report to the Secretary of Labor, the Attorney
General, the Chairman of the Federal Communications Commission, and the
Administrator of the Environmental Protection Agency for their review and
comment. DOJ, DOL, and FCC officials had no substantive comments on the
report. The EPA comments that we received are discussed in the
“Agency Comments and Our Evaluation” section at the end of this
letter, and are reproduced in appendix I.
Selected Agencies' The five agencies' section 223 policies vary
substantially among, and
Section 223 Penalty sometimes within, the agencies in terms of (1) whether
they apply to all penalty- related enforcement actions involving small
entities, (2) whether Relief Policies Varied
they provide entities with more penalty relief than similarly situated
larger entities, (3) how key terms such as small entity and penalty
reduction are defined, and (4) their conditions for and exclusions from
penalty relief. Agency officials said that none of the agencies' policies
were developed because of SBREFA, and most of the policies had been
established before the act took effect.
Agencies' Policies Were Not The five selected agencies identified eight
penalty reduction and waiver
Adopted in Response to policies as implementing subsection 223( a) of
SBREFA. According to the
SBREFA agencies' 1998 reports and our interviews with agency officials, none
of the
eight policies were adopted as a result of SBREFA's enactment, and most of
the policies had been established before the act took effect. As previously
noted, the drafters of SBREFA recognized that agencies could use existing
programs to satisfy the act's requirements. Some agencies took steps after
SBREFA was enacted to publicize and market their existing programs to small
entities. ? EPA said in its 1998 report that the agency had
“historically addressed
the special circumstances of many small entities when assessing penalties in
enforcement actions.” EPA also said that its program to reduce or
waive penalties for small entities consisted of three separate policies,
each of which had been initiated before the enactment of
SBREFA. ?EPA i ssued i ts Final Policy on Compliance Incentives for Small
Businesses (small business policy) on May 20, 1996. 11 The policy provides
penalty waivers to entities with 100 or fewer employees as incentives to
voluntarily disclose violations and to participate in compliance assistance.
? EPA's policy on Incentives for Self Policing: Discovery, Disclosure,
Correction, and Prevention of Violations (audit policy), was initially
published in the Federal Register on December 22, 1995, and was 11 An
interim version of EPA's small business policy was issued on June 13, 1995,
and the final version was published in the Federal Register on April 11,
2000 (65 Fed. Reg. 19630).
revised and republished as the final policy on April 11, 2000. 12 The policy
provides for reductions and waivers of penalties for entities of all sizes
that promptly disclose violations in writing and correct those violations.
?EPA's Policy on Flexible State Enforcement Responses to Small
Community Violations (small community policy), was issued in November 1995.
Under this policy, states may provide small communities with an incentive to
request compliance assistance by waiving or reducing the penalty if certain
criteria are met. This policy has not been published in the Federal
Register, but EPA officials said it was distributed directly to state and
local government stakeholders.
As we discuss more fully later in this report, these three policies do not
cover all EPA enforcement actions involving small entities, and do not
include all civil penalty relief that small entities can receive from EPA. ?
FCC said that its existing civil penalty (“ forfeiture”)
policies met the
subsection 223( a) requirement. FCC officials said the policy was first
published in the Federal Register on August 14, 1997, and became effective
on October 14, 1997, replacing a 1991 general policy statement. 13 The
Commission noted that many of the factors delineated in SBREFA as
potentially relevant considerations in decisions regarding penalty relief
were already contained in the Communications Act of
1934, as amended, and were codified in its rule on forfeiture proceedings.
14 ? INS said in its 1998 report that it had “long- established
policies” to provide for the reduction or waiver of civil penalties
for small entities. INS officials told us during this review that the
agency's civil penalty authority regarding small entities primarily related
to the following two areas of regulatory activity: (1) employment
verification under section
274A of the Immigration and Nationality Act (INA), as amended by the
Immigration Reform and Control Act of 1986; and (2) oversight of air and sea
carriers who bring aliens into the United States under section 273 of the
act, as amended.
12 See 60 Fed. Reg. 66706 and 65 Fed. Reg. 19618. The revisions to this
policy took effect on May 11, 2000. 13 See 62 Fed. Reg. 43474 (1997). 14 See
47 C. F. R. sect. 1.80.
? In the employer verification area, INS pointed to its “Guidelines
for Determination of Employer Sanctions Civil Money Penalties,” which
were issued in August 1991, as satisfying subsection 223( a) of SBREFA. INS
said that the guidelines had been continually updated since their issuance
and are part of the INS Field Manual. A less specific version of the INS
civil monetary penalty policy was
published in the Federal Register in 1987 and was codified in the Code of
Federal Regulations. 15 INS also noted in the 1998 report that it published
a proposed rule on April 7, 1998, seeking to amend the
agency's regulations implementing section 411 of the Illegal Immigration
Reform and Immigrant Responsibility Act of 1996. 16 INS said this statutory
provision was aimed at allowing employers of any size who have made a good
faith attempt to comply with a particular employment verification
requirement to correct technical or procedural failures before they are
deemed to be violations of the
act. At the time of our review, this proposed rule had not been issued in
final form. ? Regarding carriers, INS pointed to a June 10, 1996, proposed
rule on
“Screening Requirements of Carriers for Reduction, Refund, or Waiver
of Fines” as satisfying subsection 223( a) of SBREFA. 17 INS published
the final rule on April 30, 1998. 18
? MSHA said that an existing general civil monetary penalty relief policy
satisfied the SBREFA subsection 223( a) requirement. The policy was
published in the Federal Register on May 21, 1982. 19 In August 1999, MSHA
supplemented the policy with a policy letter that “provides
clarification of the statutory and regulatory provisions governing the
assessment of civil penalties” under the Federal Mine Safety and
Health Amendments Act of 1977. ? OSHA said that an existing policy for
granting civil monetary penalty
relief met the SBREFA subsection 223( a) requirement. OSHA officials said
the policy dates back to the Occupational Safety and Health Act of 1970 and
was most recently published as a March 1998 instruction
15 The policy was originally published at 52 Fed. Reg. 16221 (1987) and was
codified at 8 C. F. R. sect. 274a. 6. 16 See 63 Fed. Reg. 16909 (1998). 17 See
61 Fed. Reg. 29323 (1996). 18 See 63 Fed. Reg. 23643 (1998). 19 See 47 Fed.
Reg. 22294 (1982). The policy was codified at 30 C. F. R. Part 100.
directive entitled “Providing Assistance to Smaller Employers.”
The directive summarizes OSHA's detailed penalty relief procedures in its
September 1994 “Field Inspection Reference Manual.” OSHA's
policy has not been published in the Federal Register.
With the exception of EPA's small community policy statement and OSHA's
instruction directive, all of the agencies' civil penalty relief policies
have been published in the Federal Register and/ or the Code of Federal
Regulations. FCC replaced its 1991 policy statement with a formal rule after
the policy statement was successfully challenged in court. 20 The court
concluded that the policy was a rule that was promulgated without notice and
opportunity for comment and, therefore, was invalid.
The agencies' authorizing statutes often guide the scope and details of
their civil penalty relief policies. For example, section 273 of INA
generally did not permit INS to waive or reduce fines imposed on carriers of
passengers transported into the United States until the act was amended in
1994 by the Immigration and Nationality Technical Corrections Act of 1994.
Also, certain agencies' authorizing statutes require that certain minimum
fines be
imposed or that certain factors be taken into consideration when granting
penalty relief. For example, section 17( a) of the Occupational Safety and
Health Act of 1970, as amended, states that any employer who willfully or
repeatedly violates certain statutory provisions or associated regulations
“may be assessed a civil penalty of not more than $70,000 for each
violation, but not less than $5,000 for each willful violation.”
Policies Vary in Degree to The agencies' section 223 policies vary in the
extent to which they cover all Which All Small Entity civil penalty- related
enforcement actions involving small entities and all Enforcement Actions and
instances in which small entities can receive civil penalty relief. FCC's,
Relief Are Covered OSHA's, and MSHA's policies generally apply to any of the
agencies' federal civil penalty enforcement actions involving small
entities. However, an OSHA official said that the agency has interpreted
SBREFA as not applying to state health and safety programs approved by OSHA.
21 Therefore, the
OSHA enforcement data that we discuss in a later section of this report do
20 United States Telephone Ass'n v. FCC, 28 F. 3d. 1232 (D. C. Cir. 1994).
21 The Occupational Safety and Health Act allows states to operate their own
safety and health programs as long as they are determined by OSHA to be at
least as effective as the federal OSHA program. Twenty- three states have
received delegated authority from OSHA.
not include penalty relief that small entities have received under those
state programs.
EPA said states are encouraged, but not required, to adopt the agency's
section 223 policies in agency- approved state environmental programs.
However, those policies cover only a portion of the various types of
enforcement actions in the agency involving small entities. For example, EPA
officials said that only two states- Nebraska and Oregon- had adopted the
agency's small community policy at the time of our review. 22 Also, EPA's
small business policy and the agency's audit policy both require
small businesses to voluntarily disclose violations in order to receive
civil penalty relief. However, small businesses can receive civil penalty
relief without voluntary disclosure as a result of the regular
administration of nine environmental statutes EPA administers that permit
the use of civil penalties. 23 Therefore, EPA or state environmental
officials could discover a violation of one of these statutory requirements
by a small entity, propose
a civil penalty, and provide the entity with either a waiver or a reduction
of the penalty- all without reference to section 223 of SBREFA. As a result,
EPA officials said that the data that we discuss later in this report does
not include all instances in which small entities receive civil penalty
relief.
Similarly, INS officials indicated that their two section 223 policies cover
only a portion of the types of agency enforcement actions, and said that the
number of small entities receiving penalty relief under the agency's carrier
policy represents only a portion of the total number of small entities
receiving penalty relief under various other sections of INA. For example,
the officials said that carriers could also receive penalty relief under at
least five other sections of the act, including section 234 (no advance
notice of aircraft arrival or aircraft landing at an unauthorized place),
section 255 (employment on passenger vessels of crewmen with certain
afflictions), and section 256 (improper discharge of alien crewmen).
22 EPA said that states have many other mechanisms they can use to reduce
penalties for small entities. 23 EPA said that these types of penalties
address violations involving noncompliance, whereas EPA section 223 policies
are incentive policies for the regulated community that are preventative and
forward looking and are designed to encourage companies to selfregulate,
voluntarily audit their operations, come into compliance, and even go beyond
what the law requires.
Policies Vary in Extent to The selected agencies' section 223 policies vary
in the extent to which they Which Small Entities provide small entities with
more penalty relief than similarly situated larger Receive Extra Penalty
Relief entities. Some of the policies (the FCC, EPA audit, and INS carrier
policies) provide small entities with no greater penalty relief than they
provide to any other regulated entity. Under these broad agency policies,
small entities can receive penalty relief on the basis of other factors (e.
g., their ability to pay the penalty), but size is not an explicitly
relevant factor in determining either the amount of the initial penalty
assessed or any reductions from that initial assessment. Other section 223
policies (EPA's small business and small community policies) apply only to
small entities. In still other policies (MSHA, OSHA, and INS employment
verification),
small entities can get penalty relief over and above that provided to larger
entities because they meet certain size- related criteria. 24 In some of
these policies, the smaller the business, the greater the penalty reduction
they can receive. For example, OSHA's policy indicates that employers with
101 to 250 employees can get a 20- percent reduction in civil penalties,
employers with 26 to 100 employees can get a 40- percent reduction, and
employers with 25 or fewer employees can get a 60- percent reduction. OSHA
does not consider employers with more than 250 employees “small
businesses,” and they therefore are ineligible for size- related
penalty relief.
In four of the five agencies included in our review (EPA, OSHA, MSHA, and
INS), the agencies' use of targeted relief for small entities is at least
sometimes directly traceable to underlying statutes. For example, the
Occupational Safety and Health Act of 1970, as amended, requires OSHA to
assess civil penalties taking into account, among other things, “the
size of the business of the employer being charged.” Similarly, the
Federal Mine
Safety and Health Amendments Act of 1977 requires MSHA to consider, among
other things, “the appropriateness of such penalty to the size of the
business of the operator charged.”
Policies Vary in How Key The agencies' section 223 policies also vary in how
certain key terms such Terms Are Defined
as small entity and penalty reduction are defined or used. 24 However, INS
officials said that in some instances, the size of an entity could also make
penalty relief for small entities less likely. For example, they said that
the owner of a small business may be more likely to know that his/ her
employees are illegal aliens than the owner of a large business.
Small Entity SBREFA indicated that the term small entity should be defined
the same way it is defined in the RFA- a small business, a small government,
or a small organization. The RFA defines each of these terms but identifies
a process for agencies to establish other definitions. 25 For example, the
act says that the term “small business” has the same meaning as
the term “small business concern” under section 3 of the Small
Business Act, unless an agency, after consultation with the Office of
Advocacy of the Small Business Administration and after opportunity for
public comment,
establishes one or more definitions of such term which are appropriate to
the activities of the agency and publishes such definition( s) in the
Federal Register.” 26 As previously noted, several of the agencies'
section 223 policies (FCC, INS carriers, and EPA audit) provide small
entities with no greater penalty relief than that provided to larger
entities, all other factors being equal. Not surprisingly, therefore, the
term small entity is undefined in these policies. 27 Other agencies'
policies that give small entities extra relief either define the
term small entity or the agency was able to describe how the term is used in
the administration of the policy. However, the policies' definitions of a
small entity vary among the agencies, and sometimes vary within the same
department or agency. For example:
? EPA's small business policy defines a small business as a person,
corporation, partnership, or other entity that employs 100 or fewer
individuals across all facilities and operations owned by the business. 28 ?
OSHA's policy says that small entities eligible for civil penalty relief are
those with 250 or fewer employees at all work sites at any one time during
the previous 12 months.
25 See 5 U. S. C. 601( 3), (4), and (5). The RFA says that a “small
governmental jurisdiction” generally means governments of cities,
counties, or other jurisdictions with a population of less than 50, 000. A
“small organization” is generally defined as any not- for-
profit enterprise that is independently owned and operated and is not
dominant in its field. 26 SBA's current small business size regulations and
standards can be found at 65 Fed. Reg. 5533 (2000). 27 EPA noted in its 1998
section 223 report that companies with more than 100 employees but that are
considered “small entities” under the SBA definition of
“small business” could use the agency's audit policy. However,
the audit policy is not directed toward small entities and, all other
factors being equal, they get no greater penalty relief than large entities.
28 EPA officials said this definition is derived from section 507 of the
Clean Air Act, which explicitly defines a small business as a business with
100 or fewer employees.
? MSHA's policy does not specifically define the term small entity. Although
MSHA traditionally defines a small mine as having fewer than 20 employees,
the agency also sometimes uses SBA's definition of a small entity for the
mining industry- 500 employees or fewer. 29 However, in its regular penalty
assessments, MSHA defines the size of a
regulated entity by either the number of hours worked or by tonnage of
production. EPA's definition of a small government eligible for penalty
relief also varies. For example, EPA said that any small government or small
organization employing 100 or fewer individuals is eligible for penalty
relief under the small business policy. However, EPA's small community
policy is targeted toward certain communities on the basis of the number of
residents (fewer
than 2,500), not the number of employees in their local governments.
Although the INS employment verification policy requires consideration of
the size of the regulated entity in determining penalty assessments, the
policy does not define the term small entity.
Penalty Reduction Most of the agencies' section 223 policies do not contain
an explicit definition of a penalty reduction. However, our discussions with
officials in the agencies indicated that the term is being used differently
across the agencies. For example, the INS carrier enforcement office
considers a penalty reduction to be the difference between the penalty
imposed on the regulated entity and the statutory maximum penalty. For
example, if the statutory maximum penalty for a particular violation was
$3,300 and the
penalty ultimately imposed on the entity was $1,000, the INS carrier
enforcement office considers the $2, 300 difference to be the amount of the
penalty reduction. However, EPA officials said that the agency does not
consider the statutory maximum in determining the amount of penalty relief
provided under its section 223 policies. Instead, they said that a penalty
reduction is the difference between the amount initially proposed and the
amount ultimately assessed. Using the above example with a $3, 300 statutory
maximum penalty, if EPA initially determined that the penalty should be
$1,300 but later reduced the penalty to $1, 000, the amount of penalty
relief provided would be $300.
The agencies' policies also differ in how penalty reductions are triggered.
For example, under OSHA's policy, penalty reductions are automatically
29 MSHA said that all but approximately 25 mines (less than 1 percent of all
mines) meet SBA's definition of a small entity.
provided on the basis of preestablished formulas, and further reductions can
occur if the initial penalty determination is appealed. Under the INS
carrier policy, penalty relief can occur upon application by the carrier, or
automatically under a prearranged memorandum of understanding
between the carrier and INS. 30 Penalty relief under EPA's small business
and audit policies is triggered only when the small entity voluntarily
discloses a violation and asks for relief under the policy. Policies Vary in
Applicable
Section 223 of SBREFA states that agencies must establish certain Conditions
and Exclusions
“conditions and exclusions” in their penalty relief policies.
Although the statute does not require the use of any particular condition or
exclusion, it does identify some for possible inclusion. In subsection 223(
a), the act says that under the appropriate circumstances, “an agency
may consider ability to pay in determining penalty assessments on small
entities.” Subsection 223( b) lists six conditions and exclusions that
agencies may include in their penalty relief policies or programs:
? requiring the small entity to correct the violation within a reasonable
correction period; ? limiting the applicability to violations discovered
through participation
by the small entity in a compliance assistance or audit program operated or
supported by the agency or a state; ? excluding small entities that have
been subject to multiple enforcement actions by the agency;
? excluding violations involving willful or criminal conduct; ? excluding
violations that pose serious health, safety, or environmental threats; and
? requiring a good faith effort to comply with the law. As table 1
illustrates, the agencies' section 223 policies and related administrative
procedures varied in the extent to which they included these suggested
conditions and exclusions. 31 All of the policies excluded small
30 According to the INS carrier policy, carriers who are signatory to such a
memorandum of understanding will not be required to apply for penalty relief
and will get penalty relief according to certain performance standards. 31
In some cases, the agencies' section 223 policies contained elements that
were related to, but not exactly the same as, the elements suggested in
SBREFA. For example, one of the factors listed in MSHA's policy was the
effect of the penalty on the operator's ability to continue in business. We
considered this element the same as “ability to pay.”
entities from receiving penalty relief if they had been subject to multiple
enforcement actions. Other common exclusions were violations that involved
serious health, safety, or environmental threats and violations involving
willful or criminal misconduct. Only one of the policies limited their
applicability to violations discovered through participation by the small
entity in a compliance assistance or audit program- EPA's audit policy.
EPA's small business policy contained this condition until April
2000. The agency decided to eliminate this requirement in order to make it
easier for small businesses to take advantage of the policy. Since then, the
policy has allowed small businesses to receive penalty relief if violations
are discovered by any voluntary means (e. g., via participation in training
classes; use of on- line compliance assistance centers; or use of
checklists, even if not sponsored by an environmental regulatory agency).
Table 1: Agencies' Section 223 Policies Vary in Use of Conditions and
Exclusions Suggested in SBREFA
EPA FCC INS OSHA MSHA Small
Small Condition or exclusion Business Audit community Carriers Employers
Ability to pay X a X a X a X X a X a X a X Reasonable correction X XXX X b X
period Compliance assistance
X or audit program Multiple enforcement X XXXXXXX
actions Willful or criminal X X X X conduct Health, safety, or
X XXX XX environmental threats Good faith X X X X X X
a Reflects an additional administrative procedure applicable in the
agencies' settlement or adjudication of civil penalties. b Though not
explicitly part of the OSHA section 223 policy, OSHA officials noted that a
nationwide “quick- fix” program applicable to all businesses can
provide a small entity with a 15- percent penalty reduction for the
immediate abatement of certain hazards.
Source: GAO analyses of agencies' section 223 policies and related
administrative procedures or policies.
Subsection 223( b) of SBREFA makes it clear that the conditions and
exclusions that agencies can include in their small entity penalty relief
programs and policies are not limited to those suggested in the act. Each of
the agencies' policies do, in fact, include other factors. For example:
? FCC's authorizing statute for civil monetary penalties gives the agency
the broad discretion to take into account “such matters as justice may
require.” ? OSHA's and MSHA's authorizing statutes for civil monetary
penalties
require each agency to consider the gravity of the violation as an
additional policy term. MSHA's statute also requires consideration of the
“negligence” of the regulated entity. ? As previously noted,
EPA's small business policy and the agency's audit
policy require violations to be voluntarily disclosed in order to qualify
for certain penalty reductions. EPA officials said that environmental
statutes also require consideration of such factors as the degree of
culpability of the violator and the economic benefit derived from the
violation. ? The INS carrier regulation also requires the INS to consider
the
“effectiveness of the carrier's screening procedures,” and the
“existence of any extenuating circumstances.” ? The INS employer
sanctions regulation also requires INS to consider the
“seriousness of the violation” and “whether or not the
individual was an unauthorized alien.” As previously discussed,
agency- specific statutes for four of the five agencies require them to
consider the size of the entity as an explicit penalty relief condition.
Most Agencies Were MSHA was the only one of the five agencies that provided
all of the data Not Able to Provide
required by subsection 223( c) of SBREFA, and it was also the only agency
that was able to provide us with more recent data on enforcement actions
Enforcement Data in against small entities. The other agencies either (1)
provided data on the Format Requested
inspections or small entities, not enforcement actions; (2) said they could
only provide data on enforcement actions initiated against entities of any
size, not just small entities; or (3) provided data that were inconsistent
and incomplete.
Some Agencies Did Not Subsection 223( c) of SBREFA required agencies to
report by March 1998 on
Provide Required Data in the status of their penalty reduction and waiver
programs. Specifically, the Their 1998 SBREFA Reports statute said that
agencies should report the number of enforcement actions
against small entities that qualified or failed to qualify for their program
or policy and the total amount of penalty reductions and waivers. Although
this was a one- time reporting requirement, we reviewed the five selected
agencies' section 223 reports to obtain data relevant to our second
objective- to determine how many civil penalty enforcement actions each
selected agency had initiated against small entities each fiscal year since
SBREFA's enactment, and how many of those actions resulted in some form of
penalty relief.
Two of the agencies- FCC and INS- provided no small entity- related
enforcement data in their 1998 reports. FCC reported the number of
enforcement actions taken and the number of persons or entities that
received penalty cancellations or reductions between June 1996 and
January 1998 in relation to all regulated entities, not just small entities.
32 INS noted in its report that the agency had investigated approximately
6,000 businesses during fiscal year 1997 for violations of section 274A of
the INA, resulting in a notice of intent to fine in 888 of those cases.
However, INS did not indicate how many of those investigations or notices
involved small entities. Two other agencies provided data in their reports
that focused on small entities and offered useful insights into their
section 223 programs, but that were not exactly what the statute required.
EPA reported that through the end of fiscal year 1997, 95 small entities had
received relief under its section 223 program, 10 small entities had not
qualified for the program, and 44 cases were still under consideration. EPA
also reported that nearly $900,000 in penalties had been reduced or waived
through the program.
However, EPA's data focused on the number of small entities that had and had
not received relief under the program, not the number of enforcement actions
initiated against small entities that qualified and failed to qualify for
the program. 33 Also, as EPA noted in its report, the data may understate
the
32 In its reply, FCC indicated the number of enforcement actions in which
licensees requested a reduction or waiver of civil penalties because of an
“inability to pay”. However, FCC did not indicate how many of
these orders involved small entities.
33 In commenting on a draft of this report, EPA officials told us that the
number of small entities was equivalent to the number of enforcement
actions, and therefore said that the agency complied with subsection 223( c)
of SBREFA.
number of small entities receiving penalty relief and the dollar amount of
that relief. The report presented data for penalty relief provided to small
entities under what EPA considered its section 223 policies (as the statute
required). However, the report did not reflect any penalty relief that small
entities may have received under EPA's general enforcement and penalty
policies (i. e., when the small entity did not voluntarily disclose the
violation) or relief granted through state enforcement programs. 34 In its
1998 report, OSHA provided data showing the number of “enforcement
actions” (14, 550) between March 29, 1997, and December 31, 1997, in
which penalties were reduced by size of business categories (e. g., 1 to 10
employees, 11 to 20 employees, etc.). 35 However, the report also indicated
that the unit of analysis was small entities, not enforcement actions. OSHA
officials told us during this review that the data actually reflect the
number of inspections in which penalties were reduced. This
difference in the unit of analysis can be important because a single
inspection can involve a number of enforcement actions. In its report, OSHA
also provided the dollar amount of penalty reductions provided to small
entities during this period ($ 107 million) and said that about
threequarters of this amount was based solely on the size of the businesses.
MSHA's 1998 report provided the required enforcement data in the manner
that the statute stipulated. MSHA said that between April 1, 1997, and
December 31, 1997, the agency took approximately 77, 000 enforcement actions
against small entities. Of these, MSHA said that about 48, 000
actions were single penalty assessments that did not qualify for a penalty
reduction, and the remaining 29, 000 actions received penalty reductions
totaling about $2. 1 million.
Time Frames Covered by the Subsection 223( c) of SBREFA required agencies to
submit their reports by
Data Differed March 1998 but did not specify the time frames that the
agencies'
enforcement data should cover. As a result, the data that the agencies
provided varied in the dates covered. For example, MSHA's data covered the
period from April 1, 1997, until December 31, 1997. FCC's data covered the
period from June 1996 to January 1998. EPA indicated that its data was 34
According to EPA, states are responsible for the vast majority of
environmental programs,
and small entities have sought civil penalty relief from state regulators.
35 OSHA officials said that this is also the number of enforcement actions
involving small entities, because OSHA automatically provides penalty relief
for small entities.
“through fiscal year 1997” but did not indicate the starting
point for the data. 36 Most Agencies Still Could Given the difficulty in
using most of the data that the agencies provided in Not Provide More Recent
their 1998 reports, we asked each agency to provide enforcement data for
Data in the Format each fiscal year since SBREFA's enactment (i. e., 1997,
1998, 1999, and Requested
2000). Specifically, we asked the agencies to identify the number of civil
penalty enforcement actions that they had initiated in each year, the number
initiated against small entities, and how many of the enforcement actions
against small entities did and did not result in a waiver or a penalty
reduction. We also asked the agencies to provide data on the dollar amount
of the civil penalties against small entities that were waived or reduced.
SBREFA does not currently require agencies to maintain this information.
MSHA was the only one of the five selected agencies that provided the
enforcement data that we requested. (See table 2.) The data indicate that
the percentage of enforcement actions against small entities that received
some type of penalty relief ranged from about 38 percent in fiscal year 1997
to about 43 percent in fiscal year 1999. The average amount of penalty per
enforcement action ranged from about $233 (1997) to about $274 (1999). MSHA
officials said that the agency rarely provides full waivers of civil
penalties because the agency generally requires a minimal $55 fine for each
enforcement action initiated that involves a minor violation that is abated
in a timely manner. 37
36 In commenting on a draft of this report, EPA officials said the data
covered the period from March 30, 1996, through September 30, 1997. 37 See
30 C. F. R. sect. 100.4.
Table 2: MSHA Enforcement Actions and Related Penalty Relief for Small
Entities- Fiscal Years 1997 Through 2000 Fiscal Year 1997 1998 1999 2000
Number of enforcement actions involving small entities in which 103,515
116,949 106,643 105, 767 a penalty was proposed Number of enforcement
actions in which small entities received 39,015 45,225 45,555 41, 090
penalty relief Percentage of enforcement actions in which small entities 37.
7% 38. 7% 42. 7% 38.8% received penalty relief Amount of penalties
reductions for small entities (in millions) $9. 09 $10. 77 $12. 48 $11. 05
Note: MSHA considered a small entity as any mining business with 19 or fewer
employees. Source: MSHA and GAO analysis.
The other agencies varied in their ability to provide relevant data. OSHA
provided data on the number of inspections involving small entities, not the
number of enforcement actions. (See table 3.) OSHA officials said that their
database is structured in terms of inspections, not enforcement actions, and
that the database does not reflect how many enforcement actions occurred
during each inspection.
Table 3: OSHA Inspections and Related Penalty Relief for Small Entities-
Fiscal Years 1997 Through 2000 Fiscal Year 1997 1998 1999 2000
Number of enforcement inspections involving small entities in which 19, 617
18, 427 17,979 17, 187 a penalty was proposed Number of enforcement
inspections in which small entities received
19, 617 18, 427 17,979 17, 187 penalty relief Percent of enforcement
inspections in which small entities received 100% 100% 100% 100%
penalty relief Amount of penalty reductions for small entities (in millions)
$88. 03 $124.17 $123. 15 $127.00 Amount of penalty reductions for small
entities based on size of $72.85 $101.65 $101. 87 $104.92 entity (in
millions) Note: OSHA considered a small entity as any business with 250 or
fewer employees. Also, the data are
based on OSHA enforcement actions at the federal level and exclude any
penalty relief that small entities may have received under state health and
safety programs approved by OSHA.
Source: OSHA and GAO analysis.
The data that OSHA provided indicated that every inspection involving a
small entity that resulted in a proposed penalty also resulted in a penalty
reduction. As previously noted, OSHA automatically applies its penalty
relief criteria to proposed penalties. Small entities can receive the
largest penalty reductions, and the smaller the entity the larger the
reduction.
During each of the last 3 fiscal years (1998 through 2000), OSHA provided
small entities with more than $120 million in penalty relief, and in each
year more than 80 percent of the reductions provided to small entities were
based solely on the size of the entities. The data that EPA provided to us
reflected enforcement under the three elements of its section 223 programs,
not all enforcement actions in the agency. Also, the data provided were
inconsistent, incomplete, and not in the format that we requested. For
example, for fiscal year 1997, EPA said the following: ? Sixty- one small
businesses disclosed violations under the agency's audit
policy, 19 received some form of penalty relief, and 36 cases were still
“under consideration” for relief at the end of the fiscal year.
It was not clear how the remaining six cases were resolved, and EPA did not
indicate the amount of penalty relief that was provided. ? Twelve small
businesses disclosed violations under the agency's small business policy,
and 8 received penalty relief after the fiscal year had ended. However, EPA
did not indicate how the remaining four cases were resolved or the amount of
penalty relief that was provided. ? Seventy- six small communities
“utilized” the agency's small community policy, but EPA did not
indicate whether all of the communities received relief and, if so, the
amount of relief provided. The data that EPA provided for the other fiscal
years were even less complete. For example, EPA said that 76 facilities
disclosed violations under the small business policy in fiscal years 1998
and 1999, and that “all businesses that qualified for relief were
granted a 100% waiver of the
gravity- based penalty.” However, EPA did not indicate how many of the
76 facilities qualified for relief. 38 Neither FCC nor INS could provide us
with any data on civil penalty enforcement actions against small entities.
Officials in both agencies told us that because their agencies do not
provide special civil penalty relief based on the size of the regulated
entity, they do not keep data on
enforcement actions by size of entity. Most Agencies Could We also asked
agencies to determine whether any of the enforcement Not Identify actions
during this period that did not result in penalty relief involved paperwork
requirements. SBREFA does not require agencies to maintain Paperwork-
Related this information. Because MSHA was the only agency that could
identify Enforcement Actions
the number of enforcement actions against small entities that did not result
Against Small Entities in some type of penalty relief, it was also the only
agency that could identify the number of such actions that involved a
paperwork requirements. (See table 4.) 38 In EPA, civil penalties are made
up of two components: (1) the gravity of the violation
(e. g., the nature; duration; and environmental, safety, or public health
impacts of the violation) and (2) the economic benefit that the small entity
derives from the violation. EPA's section 223 policies allow the agency to
reduce gravity- based penalties, and provide
the agency with the discretion to waive economic benefit penalties, as
appropriate. However, EPA officials said that economic benefit penalties are
rarely imposed. In commenting on a draft of this report, EPA officials said
that all 76 facilities qualified for a waiver of both gravity- based and
economic benefit penalties.
Table 4: Percent of MSHA Enforcement Actions Involving Small Entities
Without Penalty Relief That Involved Paperwork Requirements- Fiscal Years
1997 Through 2000
Fiscal Year 1997 1998 1999 2000
Number of enforcement actions in which small entities did not 64, 500 71,724
61,088 64, 677 receive penalty relief Number of enforcement actions against
small entities that did not 4,537 5, 146 5,162 4, 654
result in relief that involved paperwork requirements Percentage of
enforcement actions against small entities that did 7.0% 7. 2% 8. 5% 7.2%
not result in relief that involved paperwork requirements Note: MSHA
considered a small entity as any mining business with 19 or fewer employees.
Source: MSHA and GAO analysis.
The MSHA data indicated that, in each year, less than 9 percent of the
enforcement actions without some type of penalty reduction involved
paperwork requirements. MSHA said that most of these actions imposed single
$55 fines that were required by regulation or involved more serious
violations that could have an impact on the health and safety of employees.
MSHA provided the following examples of what they considered to be
“serious” paperwork- related violations:
? MSHA regulations require that all electrical equipment must be frequently
examined, tested, and properly maintained by a qualified person to ensure
safe operating conditions, and that a record of such examinations must be
kept and made available to miners and
representatives of the Secretary of Labor. Failure to keep such records,
although technically a “paperwork” violation, may represent
failure to maintain the equipment in the specified manner. ? MSHA
regulations also require that self- propelled mobile equipment to be used
during a shift must be inspected before being placed in
operation on that shift. Any defects on the equipment that are not corrected
immediately must be reported to and recorded by the mine operator.
Therefore, an MSHA inspection that discovers defects in selfpropelled
equipment may also be recorded as a paperwork- related violation.
FCC and INS officials said they could not provide data on enforcement
actions involving small entities because their agencies do not distinguish
between large and small entities. FCC provided information on certain
enforcement actions involving paperwork requirements, but the data were
for all enforcement actions, not just those against small entities. EPA
officials said the agency does not maintain data on paperwork- related
enforcement actions. OSHA officials said that there are no enforcement
actions involving small entities that do not receive some form of penalty
relief under the agency's section 223 policy. Therefore, there are no
examples of such actions that involve paperwork requirements. Conclusions
Congress provided agencies with substantial discretion in developing their
section 223 civil penalty relief policies. Not surprisingly, the agencies
used
that discretion and developed policies that vary substantially. For example,
some of the agencies' policies cover all civil penalty enforcement actions
involving small entities, but other policies cover only some such actions.
Some of the policies apply only to small entities or provide them with extra
civil penalty relief, and other policies provide small entities with no
greater relief than large entities. The agencies also varied in how key
terms were defined and in their policies' conditions and exclusions. This
variability notwithstanding, all of the agencies' policies and programs that
we
reviewed were within the discretion afforded to them by SBREFA. Agencies
were allowed to limit the scope of their programs to only a portion of their
enforcement actions against small entities, and they could decide not to
give small entities any additional civil penalty relief. Agencies were also
allowed to establish whatever conditions or exclusions they
wanted for participation in their programs, subject to the requirements and
limitations in other statutes.
Agencies' differing missions and operating environments may legitimately
require differences in the agencies' civil penalty relief policies. However,
some elements of agencies' policies can be strengthened and made more
consistent without impinging on agencies' flexibility. For example, if
Congress wants agencies' section 223 policies to be more inclusive, it could
require that those policies cover all instances in which small entities can
receive civil monetary penalties. Also, if Congress wants small entities to
receive more civil penalty relief than is provided to larger entities
(unless, of course, larger entities receive a complete penalty waiver), it
could
require that agencies' policies or programs provide extra reductions for
small entities. These kinds of changes would improve small entities'
opportunities to receive relief from federal civil monetary penalties.
However, Congress could still permit the agencies' policies to delineate
relevant conditions and exclusions under which the penalty relief would be
authorized without allowing the conditions and exclusions to be so
restrictive that they unduly limit the scope of the policies themselves. For
example, agencies could continue to exclude small entities that have been
subject to multiple enforcement actions, exclude violations involving
willful or criminal conduct, and require that entities correct the
violations within a reasonable period. Even if agencies made these changes
to their section 223 policies, Congress would still be unable to oversee the
implementation of those policies without data. Agencies are not currently
required to collect data on the
implementation of their civil penalty policies under section 223; the
statute imposed a one- time reporting requirement that expired in 1998, and
some of the agencies failed to satisfy this requirement. To facilitate
congressional oversight, Congress could require agencies to maintain certain
types of implementation data, such as (1) the number of enforcement actions
in which civil penalties were proposed, (2) the number of those actions
involving small entities, (3) the number of those actions in which small
entities received some type of penalty relief, and (4) the dollar amount of
the relief provided. By maintaining such data, agencies would be able to
make the data available when Congress exercises its oversight duties in this
area. The data would also help the agencies themselves understand how their
section 223 policies are operating. When providing such data to Congress,
agencies should clearly define key terms such as “small entity”
and “penalty reduction” so that Congress can understand whether
variations in agencies' data are caused by differences in the
implementation of agencies' section 223 programs or other factors. Matters
for
If Congress wishes to strengthen civil penalty relief for small entities, it
Congressional should consider amending section 223 of SBREFA to require that
agencies' policies or programs (including relevant conditions and
exclusions) cover Consideration
all of the agencies' civil penalty enforcement actions involving small
entities and provide small entities with more penalty relief than other
similarly situated entities. Also, to facilitate congressional oversight in
this area, Congress should consider amending the act to require agencies to
maintain data by fiscal year or some other time period on such factors as
the number of enforcement actions involving all small entities, the number
of enforcement actions that resulted in penalty reductions, and the amount
of penalty relief provided. Any such data provided to Congress should
clearly indicate how the agency defines key terms such as “penalty
reduction” and “small entities.”
Agency Comments and On January 4, 2001, we sent a draft of this report to
the Secretary of Labor,
Our Evaluation the Attorney General, the Chairman of the FCC, and the
Administrator of EPA for their review and comment. Department of Justice
officials said they had no comments on the draft report. On January 16 and
18, 2001, FCC
and DOL officials told us they had no comments on the matters for
congressional consideration but provided several suggestions to clarify
particular sections of the report, which we included as appropriate. On
January 24, 2001, we met with the Director of EPA's Office of Regulatory
Enforcement and the Director of the agency's Office of Compliance to discuss
the draft report. During the meeting, the Directors provided several
suggestions to clarify certain sections of the report. For example, they
requested that the report clearly state that SBREFA does not currently
require agencies to maintain the information that we requested in relation
to our second and third objectives. They also said the report should
indicate that EPA views information collection requirements as the
foundation of many health and safety statutes, and that violations of those
requirements should not automatically be treated as minor infractions
meriting a waiver of civil penalties. We made these and other changes to the
draft report, and provided the Directors with a revised draft reflecting the
changes made. On January 26, 2001, the Directors of EPA's Offices of
Regulatory Enforcement and Compliance provided written comments on the
revised draft report, which are reproduced in appendix I. The Directors said
they found our evaluation helpful and were taking steps to implement some of
the report's “recommendations.” For example, the Directors said
they were planning to begin collecting data on the number of small
businesses taking advantage of EPA's audit policy. However, they also
provided several “overarching comments” regarding the report.
First, they said that “[ d] istinguishing between requirements that
have an information collection
request and those that do not is an inaccurate litmus test for
differentiating ‘major' and ‘minor' violations.” Second,
they said it is not clear that penalties issued against small businesses in
EPA enforcement actions are a
“significant concern,” noting that EPA reduces penalties below
the statutory maximums, settles most cases below the initial penalty offers,
and is required by the agency's statutes and penalty policies to consider
ability to pay, “which enables EPA to take small business concerns
into account in its enforcement actions.” The Directors also said EPA
believes
that penalty incentives should reward those who make voluntary efforts to
comply with regulatory requirements, and that agencies implementing SBREFA
programs should continue to consider the penalty factors that
Congress has established (e. g., recovery of any economic benefit of
noncompliance). We did not indicate in our draft report that violations
involving an information collection were, in any sense, “minor”
violations. In fact, as previously indicated, we added a sentence to the
revised draft that the Directors reviewed reflecting EPA's and other
agencies' concerns about this issue in relation to legislation that Congress
had considered. Regarding the
Directors' second point, it is not clear how EPA can determine whether
penalties issued against small entities are a significant concern without
the enforcement data that the Directors said the agency does not possess or
that they described as “inadequate.” Also, an entity's
“ability to pay” may be unrelated to whether that entity is
considered “small” for purposes of SBREFA. Therefore, taking
into account a business' ability to pay does not
ensure that small business concerns are taken into account. Regarding the
Directors' last points, we noted in the conclusion of our draft report that
even if agencies' policies were required to provide extra reductions for
small entities, agencies would still be free to impose other conditions and
exclusions on the receipt of penalty relief. Those factors could include,
among other things, consideration of an organization's voluntary efforts to
comply and congressionally established factors. The EPA Directors also
provided several “technical” comments on the draft report. In
several of these comments, the Directors stated the agency's
position on various issues but did not recommend changes to the draft
report. For example, in one such comment, they emphasized that EPA offers
penalty relief to small entities both through its section 223 policies and
through its policies implementing environmental statutes, and indicated that
EPA views “ability to pay” separate and distinct from
“ability to continue in business.” In other comments, the
Directors noted that EPA
data tracking for the agency's voluntary disclosure policies was
“inadequate” (although improvements were being made), and that
other data that we requested on the agency's small communities policy did
not exist. However, in other technical comments the Directors suggested
changes to
the draft report. For example, they said the report should indicate that an
enforcement program needs to meet many competing goals, and said addressing
the recommendations in the draft report may create tensions
with our previous recommendations regarding equitable treatment for
comparable violations. 39 Although we agree conceptually that an agency's
enforcement program may face competing goals, we do not believe that
providing penalty relief for small entities and maintaining data on the
amount of relief provided are inconsistent with a strong civil penalty
program. Furthermore, we do not believe that the matters for congressional
consideration in this report conflict with our previous
recommendations. In the report that the Directors cited, we listed a number
of factors that an agency could appropriately consider when determining the
penalties to be imposed (e. g., the severity of the violation and the degree
of economic benefit obtained). With the enactment of section 223 of SBREFA
(less than 2 weeks after the publication of our report), the size of the
entity involved in the violation became yet another factor that agencies
could legitimately consider when determining equitable penalty amounts.
In another comment, the Directors said the number of small entities
described as having received relief in EPA's 1998 report also represented
the number of enforcement actions taken during the reporting period.
Therefore, they said the information that subsection 223( c) of SBREFA
required be included in the agency's report was, in fact, included. However,
readers of EPA's 1998 report were not provided this information at the time
that the report was issued. Therefore, readers had no way of knowing whether
the information that EPA provided (on the number of small entities receiving
penalty relief) was consistent with the statutory requirement (number of
enforcement actions resulting in penalty relief). In the revised draft
report that the Directors reviewed, we had already noted that, in commenting
on this report, EPA said the number of small entities was equivalent to the
number of enforcement actions taken. Therefore, no
changes were made to the final report. As arranged with your office, unless
you publicly announce the contents of this report earlier, we plan no
further distribution until 30 days after the date of this report. At that
time, we will send copies of this report to Senator Richard J. Durbin,
Ranking Member of the Subcommittee; the Honorable Elaine Chao, Secretary of
Labor; the Honorable John Ashcroft, U. S. Attorney General; the Honorable
Michael K. Powell, Chairman of the Federal Communications Commission; and
the Honorable Christine Todd
39 GAO/ RCED- 96- 23.
Whitman, Administrator of the Environmental Protection Agency. We will also
make copies available to others on request. If you have any questions
regarding this report, please contact me or Curtis Copeland on (202) 512-
6806. Key contributors to this assignment were John Tavares and Aaron
Shiffrin.
Sincerely yours, Carlotta C. Joyner Director, Strategic Issues
Comments From the Environmental
Appendi x I Protection Agency
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Contents Letter 3
Results in Brief 4 Background 6 Objectives, Scope, and Methodology 9
Selected Agencies' Section 223 Penalty Relief Policies Varied 11 Most
Agencies Were Not Able to Provide Enforcement Data in
the Format Requested 21 Most Agencies Could Not Identify Paperwork- Related
Enforcement
Actions Against Small Entities 27 Conclusions 29 Matters for Congressional
Consideration 30 Agency Comments and Our Evaluation 31
Appendix I: Comments From the Environmental Protection Agency 36
Tabl es Table 1: Agencies' Section 223 Policies Vary in Use of Conditions
and Exclusions Suggested in SBREFA 20
Table 2: MSHA Enforcement Actions and Related Penalty Relief for Small
Entities- Fiscal Years 1997 Through 2000 25 Table 3: OSHA Inspections and
Related Penalty Relief for Small Entities- Fiscal Years 1997 Through 2000 25
Table 4: Percent of MSHA Enforcement Actions Involving Small Entities
Without Penalty Relief That Involved Paperwork Requirements- Fiscal Years
1997 Through 2000 28
Abbreviations
DOJ Department of Justice DOL Department of Labor EPA Environmental
Protection Agency FCC Federal Communications Commission INS Immigration and
Naturalization Service MSHA Mine Safety and Health Administration OMB Office
of Management and Budget OSHA Occupational Safety and Health Administration
RFA Regulatory Flexibility Act SBREFA Small Business Regulatory Enforcement
Fairness Act
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Appendix I Comments From the Environmental Protection Agency
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