According to Ronald Burgess Sr., senior manager in the unclaimed property practice at Deloitte & Touche, all businesses are expected to annually report outstanding unclaimed property to their state governments. However, only between 10% and 20% of businesses conform.
“This low level of compliance signals trouble,” says Burgess. “Nearly all businesses, even nonprofit and religious organizations, have some unclaimed property.”
The financial consequences of failing to comply vary from state to state. For example, in Missouri, any person who intentionally fails to render a report or perform other duties under the Uniform Disposition of Unclaimed Property Act may be assessed a penalty of up to 25% of the total value of the property. In Illinois, the fines assessed may be less, but criminal charges could be filed.
Nathaniel Shapo, director of insurance for the state of Illinois, says his office is actively involved in several investigations of businesses that have ignored unclaimed property laws. Shapo’s office is responsible for conducting unclaimed property audits of companies suspected of noncompliance. “Once an organization is chosen for an unclaimed property audit,” he says, “the company can expect a thorough and painstakingly accurate analysis of all the financial and other documents of the business.”
- Guidelines for auditing unclaimed property vary from state to state, but any business that is selected for an audit can generally expect the following:
- Auditors will ask to examine business records and/or verify the accuracy of reports filed for at least the past 10 to 15 years.
- Auditors will examine accounting records for specific types of property, and request evidence indicating the property was abandoned by its owner(s).
If, during the investigation, examiners are unable to determine that the property cleared on a bank statement or was refunded, reissued, or adjusted, the property is considered questionable.
- Finally, an informal preliminary audit report will be prepared to outline the findings of the audit.
The preliminary report is the holder’s last opportunity to remove some or all of the questionable property by providing documentation that the obligations are no longer valid. Proof must clearly show that the amounts were either not due the owner or were eventually received in some form. Finally, any property remaining on the preliminary audit report after the process is completed will be formally requested by the state to be held in custody until the rightful owner or heir makes a claim.
To find unclaimed property, search the Web
National Association of Unclaimed Property Administrators (NAUPA) (www.unclaimed.org)
U.S. Postal Service (http://new.usps.com)
Internal Revenue Service (IRS) (www.irs.ustreas.gov)