OBJECTIVES, SCOPE, AND METHODOLOGY

Objectives

The objectives of the audit were to:

• assess the management controls implemented in UST offices to identify and eliminate fraud and misconduct by private trustees, debtors, and others; and
• assess compliance with the Government Performance and Results Act as it relates to bankruptcy fraud.

Scope and Methodology

The audit was performed in accordance with Government Auditing Standards issued by the Comptroller General of the United States, and included tests and procedures necessary to accomplish the objectives. However, the UST Program has reimbursed us for auditing Chapter 7 trustees. Nonetheless, we consider ourselves to be independent and do not believe that our reimbursement arrangements with the UST Program have impaired this audit.³⁶

Generally, the audit focused on the UST Program's efforts to detect and prevent fraud and abuse in bankruptcy cases from September 1988 through May 2002. We performed audit fieldwork at the EOUST in Washington and at UST regional offices in Atlanta, Chicago, Los Angeles, New York, and Philadelphia. These five regional offices were selected because they collectively made up the majority (56 percent) of the reported referrals to law enforcement and provided a cross section of the UST Program's bankruptcy fraud and abuse control procedures and practices.

To accomplish the audit objectives, we performed the following tasks:

• reviewed applicable laws, UST Program policies, procedures, organization charts, and mission statements;
• reviewed prior audit reports and studies by the Department and the General Accounting Office on related issues;
• reviewed budgetary and contracting documents;
• interviewed the EOUST's personnel in the Director's Office, Office of Review and Oversight, Office of Research and Planning, and Office of Administration;
• interviewed 40 UST Program personnel in the five regional offices including: USTs, AUSTs, Bankruptcy Analysts, Trial Attorneys, Paralegals, Regional Bankruptcy Analysts, and Fraud Coordinators. We also interviewed six non-UST Program personnel including Assistant U. S. Attorneys, a Special Assistant to a U.S. Attorney, FBI Special Agents, and a Postal Inspector.
• reviewed pending bankruptcy legislation;
• reviewed the National Criminal Referral Tracking System, the Trustee and Employee Embezzlement database, the Pending Inquiries of Trustees and Employees of Trustees database, and the Section 110 Tracking System;
• reviewed case file information for 302 criminal referrals;
• reviewed 117 performance evaluations for 97 Chapter 7 and 20 Chapter 13 trustees;
• reviewed supporting documentation for 104 semiannual report reviews;
• reviewed supporting documentation for 92 Trustee Final Reports (TFRs) and 61 Trustee Distribution Reports (TDRs);
• reviewed supporting documentation for monthly operating reports;
• reviewed 24 prior OIG audit reports, 14 independent audit reports, and 15 UST field examinations; and
• reviewed training documentation for trustees and UST Program personnel.

We reviewed the UST Program's management controls over fraud and abuse in the bankruptcy system but did not independently attempt to identify cases of fraud. We did not evaluate the regional offices' civil enforcement action plans, nor did we interview private trustees.

36. The amount of reimbursement for 166 audits in FY 2002 was $1,293,000.