Summary of Trustee Audit Reports and Findings
Issued During Fiscal Year 1996
Information Report 97-07, (3/97)
TABLE OF CONTENTS
Summary of Chapter 7 Audit Results
Chapter 7 Summary Data
Summary of Chapters 12 and 13 Audit Results
Chapters 12 and 13 Summary Data
The Office of the Inspector General (OIG), Audit Division, conducted 2061 audits of trustees administering bankruptcy cases under Title 11, United States Code, Chapters 7, 12, and 13 during FY 1996. Our audits were conducted at the request of the Executive Office for U.S. Trustees (EOUST) as part of a continuing reimbursable agreement between the EOUST and the OIG. A map of the 21 region U.S. Trustee System appears in the Appendix to this report.2
Chapter 7 bankruptcies involve the collection, liquidation, and distribution of a case. Chapter 12 bankruptcies involve the adjustment of debts of a family farmer with regular annual income. Chapter 13 bankruptcies involve the adjustment of debts of an individual wage earner with regular income. Trustees are fiduciaries charged with protecting the interest of beneficiaries (creditors) and the debtors' interests. U.S. Trustees appoint trustees to administer Chapters 7, 12, and 13 bankruptcy cases.
Audits of Chapter 7 Trustees
We conducted 190 audits of trustee's administering over 6,900 Chapter 7 bankruptcy cases with funds totalling about $271 million. The purpose of the audits was to assess the quality of the individual trustee's accounting for bankruptcy assets and other cash management practices and procedures. Our audits sampled over 2,300 cases with funds of about $207 million. We reported over 900 deficiencies for an average of 5 deficiencies per report. The most common findings in the Chapter 7 audits were in the areas of accounting practices and case tracking.
Based on our audits, we issued opinions on the adequacy of the individual trustee's accounting and cash management practices and procedures. Our opinions are classified as Adequate (no or non-significant deficiencies noted during the audit), Adequate Except For (less than significant deficiencies noted during the audit), or Inadequate (significant deficiencies noted during the audit). During FY 1996, we reported the accounting and cash management practices and procedures were Adequate for 45 percent, Adequate Except For 49 percent, and Inadequate for 6 percent of the trustee's audited.
Audits of Chapters 12 and 13 Trustees
We conducted 16 audits of Standing Trustee's administering Chapters 12 or 13 bankruptcy cases in 13 of the 21 U.S. Trustee regions. The purpose of the audits were to assess the: (1) fairness of representations in the Standing Trustee's Annual Report; (2) adequacy of the Standing Trustee's accounting system and internal controls; and (3) Standing Trustee's compliance with Chapters 12 or 13 of Title 11 of the U.S. Code, Directives and Guidelines issued by the EOUST, and other applicable laws or regulations. We audited trustees administering about 1,000 cases which had disbursements to creditors in excess of $18 million during the period reviewed. We reported a total of 40 deficiencies in the Chapters 12 and 13 audits, an average of 2.5 per audit. The most common findings in the Chapters 12 and 13 reports were in the areas of case administration.
We issued opinions on the fairness of the presentation of the Standing Trustee's Annual Report. Since we cannot confirm caseloads with the U.S. Courts, all our report opinions automatically become at least 'qualified' (i.e., an exception exists to an 'unqualified' opinion) even in the absence of any audit-found material deficiencies. Aside from that issue, some reports had other exceptions which would have resulted in a qualified opinion in their own right. We issued qualified opinions for the Standing Trustee's audited during FY 1996.
The tables presented in this report break down the type and number of deficiencies by U.S. Trustee region, as well as statistical information on deficiencies, opinions, cases, and funds audited for Chapters 7, 12, and 13 trustees.
1 The audit of Chapter 13 Standing Trustee Phillip Armstrong was contracted to be performed during FY 1995; however, this audit was not initiated until FY 1996 because the Standing Trustee did not complete or submit his annual report to the United States Trustee. Therefore, it is being included as one of the 206 audits performed during FY 1996 reports.
2 Although shown on the map as parts of United States Trustee Regions 4 and 21, North Carolina and Alabama do not currently participate in the U.S. Trustee System, and we do not perform any audits in these states.