AIM Act Update: Certified Audit for Recipients of Specific Allocations Due May 31, 2024
To avoid being caught unaware, companies subject to regulation under the U.S. Environmental Protection Agency’s (EPA’s) hydroflouorocarbon (HFC) reduction rules promulgated under The American Innovation and Manufacturing (AIM) Act must file a third-party audit of the company’s quarterly and annual HFC inventory reports previously submitted to the EPA by May 31, 2024. These reports differ depending on whether the reports are for an entity that: (1) imports, (2) produces, (3) exports, or (4) sells HFCs and the reports contain information such as the total HFCs handled by the company, HFC allowances for the company and details regarding how those allowances are calculated. The auditors must review the inputs the regulated entities used to develop their quarterly and annual reports to the EPA which may include regulated substances imported, exported, produced, or destroyed, and a random sample of batch testing results. EPA’s audit requirement applies to companies producing, importing, exporting, or reclaiming, HFCs regulated by the AIM Act; subject HFCs may be present in various products such as aerosols, foams, refrigerants, air conditioners, and heat pump products.
Unlike most environmental audits conducted under U.S. EPA’s longstanding Audit Policy under 40 C.F.R. § 84.33, the third-party audit must be conducted by a certified public accountant or an accounting firm. In addition, the auditor must meet the employment and financial criteria outlined in 40 C.F.R. § 84.33(h), including not having been employed by, and not having received more than a quarter of their revenue from, the regulated party during the twelve months immediately before the date of hire.
The EPA has determined that attestation engagements (called agreed-upon procedures (AUP) agreements) will meet the so-called HFC Allocation Framework Rule if they are performed under the American Institute of Certified Public Accountants (AICPA) Attestation Standards (specifically AT-C section 215 Agreed-Upon Procedures Engagements). An EPA guidance document explains developing AUP engagements that align with the regulatory requirements including tracking of allowances and the correct methods of submission of the report.
The third-party audit report must include a summary of findings; identification of any instances where specified values do not meet applicable requirements or allowances; and a list of records reviewed. Records subject to AUP engagements will differ depending on the activities the entity conducts. Third-party audit reports are due annually by May 31 of the year following the compliance period, which for the first such compliance period, means the audit must be submitted by May 31, 2024.
Given the requirement that a CPA attest to the audit, most national environmental compliance firms do not have the resources to complete these audits. However, several specialized accountancies are conducting these audits. If you have questions regarding AIM Act compliance generally or to determine if your company is subject to this requirement, please contact Amanda Beggs at [email protected], Pete Tomasi at [email protected], Judah Lieblich at [email protected], or Gary Rovner at [email protected].
