The United States Trustee should advise the debtor's principals and debtor's counsel, in writing, that an IDI has been set at a tentative date and time. Reasonable effort should be made to accommodate the various individuals' schedules. While it is preferable to conduct the meeting in person, factors such as the small size or lack of complexity of a case, as well as the resources available in the local office, may warrant alternative arrangements. For example, a telephone conference with the debtor can be conducted. Regardless of the method employed, it is vital that contact with representatives of the debtor be promptly initiated and that the IDI be held prior to the section 341 meeting.

Prior to the IDI, the United States Trustee should make a written request for certain financial and other information pertaining to the debtor's business or affairs. The request can vary depending on the nature or size of the business. Typically, financial statements, prepetition bank statements and checks, federal tax returns, material lawsuits, and executory contracts should be requested. The debtor should also be asked to provide documentation such as proof of a debtor in possession account, evidence of insurance, as well as counsel's employment order, to ensure the case is in administrative compliance. Regardless of the debtor's complete compliance, the IDI should proceed.

The primary focus of the IDI is to gather key financial and background information on the debtor's business, focusing on the past, the present, and the future. The debtor should be encouraged to provide a historical background of the business, its principals, and its products or services. Key customers, primary creditors, major contracts, and significant lawsuits, if any, should be identified and discussed. The immediate and underlying reason(s) for the filing of the chapter 11 bankruptcy should be fully addressed. The debtor and debtor's counsel should be asked to identify the immediate hurdles which must be overcome to stabilize the business. Questions about how the debtor plans to proceed through chapter 11 and, ultimately, resolve the case, including a tentative timetable, should be raised. The United States Trustee may also discuss the debtor's accounting controls. Finally, the debtor's schedules and statements should be reviewed carefully with the debtor and debtor's counsel in order to identify any inconsistencies or omissions based upon the information disclosed during the IDI.

At the conclusion of the IDI, the United States Trustee should make an initial assessment as to the accuracy of the debtor's schedules and statements, whether financial reorganization is a viable option for this debtor, and what case management tools and alternatives should be considered given the circumstances of the case. The key information gathered at the IDI and the initial assessment should be set forth in a written report so that it can be more readily used by the United States Trustee case attorney for reference during the section 341 meeting and for general case management purposes.

At the IDI, the United States Trustee should set forth the statutory duties and obligations of a debtor in possession. The debtor's representatives should be provided with a copy of the Program's chapter 11 operating guidelines and monthly report forms, which should be explained and discussed. The procedures for calculating and paying the quarterly fee assessed pursuant to 28 U.S.C. § 1930(a)(6) should be explained. The United States Trustee should ensure that the debtor has closed its former bank accounts and established separate debtor in possession bank accounts. The debtor should be required to provide proof that appropriate insurance coverage is being maintained. If applicable, the statutory requirements regarding the use of cash collateral should be explained.

The role of the United States Trustee in the administration of chapter 11 cases should be explained to the debtor. The debtor should be advised that the United States Trustee will take appropriate measures to protect creditors' interests and the circumstances under which the United States Trustee will take such action.

Information and commitments regarding either compliance matters or document requests which are obtained from the debtor's representatives at the IDI should be documented and retained in the case file. A specific time frame within which any outstanding deficiencies or issues will be resolved should be established prior to the conclusion of the IDI. The debtor's failure to adhere to any such agreement should result in prompt action by the United States Trustee.

The operating guidelines contain a requirement that the debtor close its prepetition bank accounts and open new debtor in possession accounts. Absent court authorization, the accounts may be maintained only in depositories that agree to post a bond or pledge securities for all deposits not insured or guaranteed by the United States or by a department, agency, or instrumentality of the United States, or backed by the full faith and credit of the United States. 11 U.S.C. § 345(b). The debtor should establish a separate general account for the purpose of paying bills incurred during the administration of the case. The debtor should also establish a separate tax trust account so that it may escrow the necessary funds for the payment of postpetition taxes (including, for example, payroll and sales or excise taxes) when such liabilities are incurred.

The debtor may also be required to establish separate accounts for such items as payroll and payments to secured creditors. Savings accounts and certificates of deposit may be maintained as well, pursuant to the statutory obligation to obtain a safe, yet reasonable, return on estate funds for the benefit of creditors. See 11 U.S.C. § 345(a). The debtor in possession's account checks and statements should be imprinted with the phrase "Debtor in Possession." For example, the checks could be styled as follows:

Estate of XYZ Corporation
Debtor in Possession
101 Main Street
Anywhere, U.S.A. 11111

This caption on the checks is intended to notify creditors and third parties that the debtor is operating under the protection of the bankruptcy court. Notice is thereby given to all persons who may receive the check that they are doing business with a debtor and that they may have different rights and responsibilities than when dealing with a non-debtor individual or entity, i.e., that they may have an administrative claim if the check is not honored. Creditors receiving such checks for the improper, unauthorized payment of prepetition debts may disclose this information to the court and the United States Trustee, who may take corrective action. In re Young, 205 B.R. 894 (Bankr. W.D. Tenn. 1997); In re Gold Standard Baking, Inc., 179 B.R. 98 (Bankr. N.D. Ill. 1995); In re Johnson, 106 B.R. 623 (Bankr. D. Neb. 1989) (debtors not required to imprint "debtor in possession" on checks).

A debtor must maintain appropriate insurance coverage, and documentation regarding the existence of the coverage must be provided to the United States Trustee as early in the case as possible.

The dollar amount of the insurance coverage must be sufficient to cover the fair market value of the estate's property. Information about the fair market value of the property can be derived from such sources as the testimony of the debtor's principal, the schedules and statement of financial affairs, and appraisals prepared in connection with financing or valuation hearings.

The extent of coverage must be adequate, given the circumstances of the case. Depending on the case, the debtor may be required to maintain all or a combination of fire and extended liability insurance, general liability insurance, worker's compensation and unemployment insurance, employee health insurance (especially if pursuant to a collective bargaining agreement or retirement plan; see 11 U.S.C. §§ 1113 and 1114), malpractice insurance, product liability insurance, and liquor or dramshop insurance. Insurance companies and agents should be instructed to provide the United States Trustee with prior notification regarding any change, cancellation, or expiration of a debtor's insurance policy. A debtor should also be required to provide separate notice to the United States Trustee regarding any change in insurance coverage.

The timely filing of reports of operations is crucial to the efficient administration of chapter 11 cases. These reports are designed to provide the United States Trustee, the court, creditors, and other parties in interest with reliable information regarding the current status of a Case. The United States Trustee should use the information contained in the reports to identify cases lacking a realistic prospect of reorganization and to evaluate the feasibility of a proposed plan of reorganization.

The debtor in possession should file operating reports each month throughout the pendency of the case. A deadline for the submission of the initial report should be set at the initial debtor interview. The report should be filed with both the United States Trustee and the clerk of the court. The debtor should also provide a copy of the report to the Chair of any creditors' committee appointed to serve in the case.

The United States Trustee retains the discretion to waive or modify the reporting requirements. The rationale underlying any such decision, however, should be documented in writing and maintained in the file. Moreover, this discretion should be exercised sparingly, given both the importance of timely and accurate financial information in the reorganization process, as well as the need to avoid the appearance that a debtor is receiving disparate treatment. The debtor's obligation to file monthly operating reports ends when a case is converted or dismissed. Postconfirmation, the United States Trustee should require submission and filing of reports pursuant to 11 U.S.C. § 1106(a)(7). See USTM 3-10.7.

Different reporting formats may be used for different types of cases. For example, the operating report form used for a case involving an ongoing manufacturing concern may be different from the form more suitable for use in a real estate case. Generally, the debtor's operating reports should be premised on the accrual basis of accounting. Under this method, revenue is considered earned in the period in which sales are made or services are rendered (regardless of when payment is collected), and expenses are considered in the period in which they are incurred regardless of when they are paid.

The operating report form used in a standard business reorganization under chapter 11 should encompass the elements described in the following subsections.

The United States Trustee should require the submission of cash statements showing the receipts and disbursements of the debtor, as well as a separate cash account reconciliation statement for each of its bank accounts, e.g., general account, tax escrow account, and payroll account. The information contained in these statements will reflect whether the debtor's operations are generating a positive cash flow. The information should be analyzed with appropriate consideration given to the seasonality of the debtor's business and any historical information that is relevant.

Aside from the income and other items comprising cash receipts, the cash statement should contain the debtor's expenditures for inventory, salaries, taxes, etc. The United States Trustee can use the information reported in these statements to discover:

1. whether the debtor is making unauthorized payments to professionals;
2. whether the debtor is improperly paying prepetition debts;
3. whether the debtor has sufficient cash flow to effectively reorganize;
4. whether inordinate payments are being made for travel, entertainment, or other employee benefits; and,
5. whether improper payments are being made by the debtor that will hamper its ability to reorganize.

The debtor should provide a regular monthly statement of operations (income statement) that indicates whether the debtor is generating sufficient funds to reorganize. The statement of operations form is a comparative statement designed to allow the United States Trustee to review all the information from a particular debtor on one spreadsheet.

A detailed review and analysis of this statement is important as it provides a better picture of a debtor's operations than does the cash statement. Many expenses are paid less frequently than on a monthly basis. In addition, there are non-cash accounts (e.g., depreciation and amortization) that do not appear on a cash statement, yet must be taken into account in analyzing the ongoing viability of the debtor. For example, although depreciation is a non-cash item, the debtor will eventually need to buy new machinery and equipment or pay for other capital improvements.

The accrual income statement is also important since it indicates the cost of goods sold. This requires a beginning inventory figure based upon a physical or perpetual inventory. The beginning inventory figure is critical since it is only after purchases have been added and ending inventory deducted that one arrives at the cost of goods sold. This will determine the debtor's gross profit margin. At this point, a comparative financial analysis can be accomplished using statistics from prior years.

The debtor is required to provide a balance sheet on a monthly basis to allow the United States Trustee to review the debtor's changing assets and debts on a single spreadsheet.

Careful analysis of the balance sheet is required as it can uncover whether the debtor is making payments on prepetition debts, whether assets are being dissipated, and whether the debtor is accumulating unpaid postpetition liabilities and uncollected postpetition accounts receivable. If any of these occur, the United States Trustee should take appropriate action.

The taxes payable or tax reconciliation statement provides a means for monitoring and verifying that a debtor is current with its postpetition tax obligations. Aging information about these obligations should be provided. Close scrutiny of this form is critical and prompt remedial action should be undertaken by the United States Trustee if unpaid postpetition obligations accumulate.

The United States Trustee should maintain an information exchange program with the Special Procedures Staff of the Internal Revenue Service. This exchange will provide an independent means of checking and verifying the debtor's information regarding federal tax obligations. The Internal Revenue Service, in turn, is authorized to notify the United States Trustee when its records indicate that a debtor has failed to satisfy a postpetition tax obligation.

In addition to the five standard forms previously discussed, the United States Trustee retains the discretion to require any additional reports necessary to ensure that a case is properly monitored and administered. Examples would include:

1. A requirement that copies of previous years' tax returns and financial statements be filed with the United States Trustee.
2. A requirement that a debtor file a list of inventory.
3. A requirement that a debtor file a list of its employees and their current salaries.
4. A requirement that a debtor provide an aging statement regarding its accounts receivable.
5. In a real estate case, a requirement that a debtor submit a rent roll.
6. A requirement that a debtor submit a check register.
7. A requirement that a debtor submit a statement of sources and uses of cash (Cash Flow Statement).