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The U.S. Trustee Program's Efforts to Prevent Bankruptcy Fraud and Abuse
Report No. 03-17
Office of the Inspector General
OFFICE OF THE INSPECTOR GENERAL, AUDIT
In its response to the draft report, the EOUST stated that the audit report clearly identifies the need for enhanced and comprehensive efforts to identify fraud and abuse in the bankruptcy system, and provides several recommendations that will improve EOUST's ongoing activities in this critical area. Further, the EOUST stated that it largely concurs with our findings and analyses.
The EOUST also stated that despite the current Administration's efforts to provide the program with additional resources, it is not realistic to expect that it will enjoy financial and personnel resources sufficient to uncover "all" civil and criminal fraud and abuse in the bankruptcy system. We indicate on page 29 of the report that the UST Program will never be able to prevent or identify all instances of fraud and abuse. Therefore, the UST Program should focus its resources on higher-risk types of fraud most affecting the bankruptcy system.
Additionally, the EOUST stated that it is important to recognize that the UST Program's authority is limited to civil enforcement and is not authorized to conduct criminal investigations or to prosecute cases without express authority from the United States Attorney. We agree and stated on page 7 of the report that the USTs are responsible for taking legal action (civil) to enforce the requirements of the Bankruptcy Code and referring cases for investigation and criminal prosecution. Further, we indicated on page 46 that criminal investigations and prosecution is the responsibility of law enforcement agencies and the U.S. Attorneys Office.
Finally, the EOUST requested some minor technical changes to the report. We made the requested changes except for the following:
Page 11: "The second category, providing $82.4 million or 55 percent of the UST Program's funding, is quarterly fees paid by the Chapter 11 debtors. The other $7.4 million or 5 percent comes from miscellaneous compensation associated with Chapters 12 and 13 debt collection receipts, and refunds."
Technical Correction 8: "The second category, providing $82.5 million or 54 percent of the UST Program's funding, is quarterly fees paid by the Chapter 11 debtors. The other $7.4 million or 5 percent comes from miscellaneous compensation associated with Chapters 12 and 13 debt collection receipts."
Explanation for Technical Correction 8: The dollar amount and corresponding funding percentage were corrected for accuracy. Additionally, the source of funding was corrected.
OIG Response: Based on the Program's fiscal year 2003 budget, we adjusted the amount to $82.5 million. However, the percentage remains at 55 percent. The budget includes refunds as a source of funding.
Page 56: FY 2002 and 2003 Performance Indicators Chart.
Technical Correction 16: Substitute the Performance Resources Table included as Attachment 2 to this Appendix.
Explanation for Technical Correction 16: The chart depicted is not current.
OIG Response: Change not made because the chart was current for our audit period.
The status of the report's recommendations follows.