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Audit Highlights
In 2002, we enhanced our audit program through the implementation of the EHS Compliance Assurance Program. The program establishes four tiers for addressing EHS compliance from facility self-assessments to independent audits.
The EHS auditing program also incorporated expert guest auditors (from the various Pinnacle West operations) to be a part of the EHS audit team. This program enhances the knowledge and skills of EHS professionals throughout the organization. In scheduling and prioritizing audits we review the following:
EHS Compliance and Operational Risk Factors
Business Risk Factors Include
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Proximity to sensitive receptors
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EHS planning and budgeting
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Age of the facility
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Impact to company reputation
We review the risk-based audit scheduling process annually to ensure all criteria are current and applicable. Prior to an on-site audit, our auditors determine the scope of individual audits based on the facility’s risk factors. Even if the scope of an audit is expected to be limited, auditors may, at their discretion, perform a more comprehensive audit once on site.
Our audits incorporate all regulatory requirements for air; water; waste; industrial hygiene; safety; Emergency Planning and Community Right to Know Act (EPCRA); Department of Transportation (DOT); pollution prevention; and internal EHS policies, procedures and management practices.
Upon completion of an audit, our auditors meet with the facility’s manager to discuss the results of the audit and note any areas of concern or accomplishments. Significant areas of concern are noted as audit exceptions and are reported in a formal audit report. The primary causes of audit exceptions are identified in a final audit report. The facility manager then must complete a correction plan within 30 days. The audit team then enters the audit findings into a database to track the facility’s progress toward correction, as well as identifying companywide trends.
Results of EHS audit exceptions are reported quarterly to executive management and at least annually to the Board of Directors. Officers receive quarterly and annual reports on audit activities and trends in audit findings. Additionally, facility managers are provided with quarterly summary reports on EHS audit exceptions for incorporation into their EHS self-assessment activities.
We adjust the scope of our audits according to the diversity of each facility’s operations and risk factors. In general, we conduct audits of power plants and service centers every one-to-two years and audits of our business offices every two-to-three years.
In 2002, our audit team conducted announced audits of nine service centers, two business offices, five power plants and five other facilities.
Pinnacle West has implemented an ongoing effort to verify the EHS compliance audit program conforms to select reference standards and to identify opportunities for improvement. As part of that effort we contracted an independent third party to conduct a review in October 2002. In general, the independent review revealed the current program compares well to internal and external standards. The review also identified several areas of strength for the audit program including:
- The audit program is effective as a tool to identify and address issues.
- The use of EHS guest auditors from various operations within the company has allowed auditors and facility personnel to interact in an audit setting and to share knowledge and skills.
- The program provides a level of assurance that matches internal customer expectations.
- The audit program is very effective in planning and tracking auditors’ activities, training and continuing professional development for the maintenance of professional certifications.
Improvement opportunities included enhanced reporting to the Audit Committee of the Pinnacle West Board of Directors and auditing of Pinnacle West subsidiaries.
We utilize EHS self-assessment programs as part of our Compliance Assurance Program. Using EHS self-assessments, individual facilities review their EHS programs and identify strengths and weaknesses. In 2002, APS facilities completed 36 EHS self-assessments.
Vendor Audits
APS evaluates the environmental performance of suppliers in a variety of ways, including periodic audits of vendors by the EHS audit group. In addition, we joined CHWMEG, a trade association of waste generating companies interested in efficiently reducing environmental liabilities. CHWMEG, which comprises 91 enterprises and includes 135 different companies, conducts comprehensive independent audits of commercial facilities that treat, store, dispose, recycle or transport waste. We participated in five CHWMEG audits in 2002.
Finally, we also belong to the Joint Utility Vendor Audit Consortium (JUVAC) and participated in six of 19 JUVAC audits. Of the 19 vendor audits, 89 percent were waste treatment, storage and disposal facilities; the remaining 11 percent were recycling firms. APS also conducted an additional eight specific vendor audits.
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