Does your organization have an unclaimed property compliance policy? Are procedures documented in writing? If yes, are they complete? When is the last time the procedures were updated?
An unclaimed property policy combined with comprehensive procedures is a key component of compliance. The policy can be relativity simple; for example, “It is this organization’s policy to comply with all applicable unclaimed property laws.” The procedures are more complicated and should include a detailed roadmap for keeping your organization in compliance to the greatest extent possible.
To determine if your procedures are complete, take a look at the entire organization. Are there any legal entities that may not be included in the current reporting process? How are acquired companies handled pre and post-acquisition? What types of property does each legal entity potentially generate? Do the procedures address all property types?
The key here is potential. It may seem logical to skip over some property types like payroll if you rarely have an uncashed payroll check. Comprehensive procedures ensure that in the unlikely event your organization has an uncashed payroll check it will be handled properly. This can also be helpful in an audit. “How do we know we have never had an unclaimed payroll check in the last 11 years? We follow our procedures and we have documentation to prove it.”
Once all property types are identified, make sure there is a detailed plan to identify, track and report each type of property. Remember to:
- Be specific
- Identify reports by name
- Include required accounting entries
- Assign responsibilities to a position rather than a person
Don’t forget to make sure that policy decisions are included. For example, does your company take advantage of business to business exemptions? Some organizations choose not to report business to business transactions where allowed by law and others choose to report them anyway. Ensure no one has to guess at reporting time by including these types of decisions in the procedures.
As a best practice, include the date the procedures were last updated. Retain older versions for audit/historical purposes.
Make sure you have proper segregation of duties. Because unclaimed funds do not belong to the organization and may not be missed by the owner, they are at a higher risk of fraud.
Periodically review and test the procedures to ensure they are accurate, being followed and are working as intended. Too many times, procedures end up on a shelf collecting dust.
And remember, a little work on the front end can save a lot of work on the back end. Incomplete policy and procedures can almost guarantee compliance problems down the road.