Unclaimed Property

Unclaimed property (“UP”) is the tangible or intangible property of a third-party owner, held by a company (“holder”), which must be treated as lost or abandoned if the property owner does not claim the property after a specific period of time.

Common forms of UP include:

Stocks
Uncashed/stale dated disbursements (payroll, accounts payable, rebate, dividend, etc.)
Insurance payments or refunds
Unresolved accounts receivable credit balances
Dormant savings or checking accounts
Gift certificates/cards
Virtual currency

States are estimating that 65-90% of companies that should be filing annual UP reports fail to do so or file incorrectly.

UP knowledge is powerful, because what you don’t know could lead to a strain on internal resources and significant state assessments if questioned by the state or its 3rd party auditors.

Common statements made by companies that may not protect them in a state audit or review:

We don’t have any unclaimed property.
We already file UP reports and they are usually zero.
We have a UP policy and procedure for our annual compliance process.
Our aged accounts receivable credits are with current customers.
I reviewed our outstanding check list and do not have any aged checks.
I reviewed our current accounts receivable aging and do not have any aged credits.
We only write off deminimus amounts.
We file and let the UP software apply any applicable exemptions.

In our experience, these beliefs give a false sense of security against a significant audit or state assessment. Having an understanding of how the states audit, the expected documentation requirements to prove innocence, and the pitfalls of the complex compliance process could save a company a considerable amount in resources expended and state liability assessments. Even companies with a consistent filing history could find itself subjected to an audit or compliance report review given its state of incorporation, industry, annual revenues and/or acquisition history.

If Unclaimed Property is a business matter keeping you up at night, Marcum can help!

Risk Assessments

Marcum can assist you with a health check on your UP process, filings, and policies. This high level review will look at readily available data sets to quantify a potential range of UP exposure. This assessment will give management the ability to analyze the appropriate risk mitigation options with tangible exposure amounts and understand the cost/benefit to those options.

Compliance

Marcum can help minimize the administrative burden of the required annual compliance and due diligence process that is a year-round process. We can ensure that exemptions are applied correctly, handle all due diligence letter mailings and response tracking, and generate the appropriate NAUPA data files and reports for remitting to the State.

Policy and Procedures

Robust and unclaimed property-specific policy and procedures are a company’s first defense against a state review or audit. Marcum can review and provide best
practice recommendations for any policy and procedures currently in place at your company. If policy and procedures are not currently in place, Marcum can conduct interviews with the appropriate company personnel to draft the necessary policy and procedures to ensure that the company’s compliance reporting is complete and accurate, and that the appropriate supporting documentation is being kept for what is not reported, which is the true risk if audited.

3rd Party Audit Defense and Consulting

Marcum can help defend the company from the moment a company receives an audit notice through to the end when the company needs to negotiate a settlement with vital assistance throughout the audit process. Given the enormous amount of records that a state or 3rd party auditor can request, it is important for a company to have an advocate that can help them to understand the implications of the requests, the records they can provide, and the ability that they have to defend those records.

Voluntary Disclosure Agreement (VDA) and Negotiations

Marcum can help you navigate your way through the process, from filing the VDA and completingthe self-review testing, to negotiating a settlement. With our extensive experience, we can help with analysis of the applicable general ledger accounts as well as prepare practical positions that could help reduce potential UP liabilities.

Due to the high rate of non-compliance associated with UP and the amount of money involved, states and third-party auditing firms will continue to aggressively pursue UP audits and reviews of compliance reports as a means to generate revenue and close budget gaps. Businesses need to be wary of their potential UP profile, and the risks associated with an aggressive audit. Education is the first step in the UP process, as most UP exposure lies in the unknown, not the known.

August 25, 2022