U.S. Department of Justice



                      		Executive Office for United States Trustees





Office of the Director  	             Washington, DC 20530



				  March 17, 1993







MEMORANDUM



TO:		All United States Trustees



FROM:		William F. Baity

		Deputy Director



SUBJECT:	Procedures for the Resolution of Deficiencies and 

		Closure of Chapter 12 and 13 Audits





	The following discussion sets out the standard operating 

procedure for closure of the auditors' reports on chapter 12 and 

chapter 13 trustees, whether case-by-case trustees or standing 

trustees.  Currently, chapter 12 trustees receive an audit at 

least once every three years conducted by the office of Inspector 

General.  A chapter 13 trustee receives an audit every year 

conducted by an independent accounting firm.  To be able to 

properly supervise the chapter 12 and 13 trustees, the United 

States Trustee must be involved in the audit process and 

resolution.



	The regional standing trustee coordinator as the designee of

the United States Trustee should participate in the exit

interview between the auditors and the trustee.  This interview 

provides the United States Trustee with an overview of the 

trustee's operations and identifies areas needing improvement and 

areas requiring corrective action.  Appropriate remedial action 

also may be discussed during the exit interview.



	Submission of an auditor's report to the United States 

Trustee does not constitute closure of the audit by the Program.  

Rather, As discussed below, closure occurs only after the United 

States Trustee recommends and the Assistant Director for the 

office of Review and oversight concurs that all findings have 

been satisfactorily addressed.  For chapter 12 audits, the United 

States Trustee must-submit a closure recommendation to the Office 

of Inspector General.  A copy of the recommendation should be 

provided to the Assistant Director, Office of Review and 

Oversight.





	Within 45 days of the receipt of the audit report, the 

chapter 12 or 13 trustee must submit to the United States Trustee 

a written explanation of corrective action and procedural changes 

which have been implemented to prevent each noted deficiency from 

reoccurring.  The United States Trustee must confirm the 

trustee's actions.



	As part of the standing trustee supervision functions, you 

should ensure that any actions reported as corrected by the 

trustee have in fact been Implemented.  Whenever an audit report 

contains a consequential finding as listed below, the United 

States Trustee must seek documentation and/or make an on-site 

visit to the trustee's office to verify resolution.  This 

verification must take place within three months of the trustee's 

response.  The designee will provide a memorandum to the files 

describing, for each noted deficiency, the resolution implemented 

and the verification process.



		CHAPTERS 12 AND 13 AUDIT DISCREPANCIES

		     REQUIRING FOLLOW-UP VISIT(S)





	1.	Insufficient computer security, including lack of

 		restriction on internal software edits



	2.	Non-existent, inaccurate, incomplete or slow bank 

		reconciliations



	3.	No restrictive endorsement of debtor checks received



	4.	Lack of procedure to verify control over receipts



	5.	Lack of receipt policy for hard currency remittances



	6.	Inadequate control over facsimile check signing machine 

		and signature stamp



	7.	Insufficient documentation of expenses



	8.	Inadequate oversight of cash related transactions and 

		employee delegated responsibilities in maintaining 

		financial records



	9.  	Failure to make timely disbursements to creditors



	The closure' of the audit is more that a mere formality and 

should be accomplished no later than, six months from the date of 

the audit report.  The United States Trustee must determine that 

the trustee has indeed corrected all noted deficiencies and 

forward the audit closure report to the Assistant Director prior 

to this deadline in order to allow time for the Office of 

oversight and Review to determine that the audit closure report 

is complete.



	The above delineated audit closure procedures are effective 

with the receipt of 1992 audits for chapter 12 standing trustees 

and FY '92 audits of standing 13 trustee.