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There is a growing tendency to hold municipalities and their officials or employees accountable for environmental pollution, even when they are carrying out a public function; this is accompanied by an increase in penalties and the threat of criminal liability. Two examples are given, based on CERCLA and the Clean Water Act. Municipalities and individuals can protect themselves in a number of ways. Municipalities and municipal leader must understand the extent and nature of environmental regulation and potential liability. An audit of all municipal functions, buildings, and services should be conducted to determine compliance with applicable environmental laws. The private sector has increasingly become aware of the importance of "compliance audits" both to identify areas where potential liability may be reduced and to protect against liability. Municipal employees must be trained in complying with and responding to environmental laws. In addition, municipalities can privatize many services and thereby avoid a large component of potential liability.