KeepUP™ Blog

2/15/16 9:22 AM

4 Ways Company Size Affects Unclaimed Property Compliance

by Greg VerMulm



Although unclaimed property laws are the same for all sizes of companies, an organization’s size does have some bearing on how unclaimed property should be managed.

Smaller companies often have less to worry about, because they are less often the target of auditors, and it’s less complicated to deal with smaller numbers of records.

Larger companies face a number of complex challenges related to reporting of unclaimed property. Below are four of the most common.


    1. Recordkeeping: massive numbers of records and greater potential for human error 

      Many small businesses still keep paper records, which can complicate research if needed for an unclaimed property assessment. On the other hand, most small offices in any industry have few enough records that research isn’t overly cumbersome.

      Larger companies have a different type of problem. While they may have more sophisticated recordkeeping systems, owner and transaction records often are spread across multiple ERP systems. It’s easier to set up feature-heavy recordkeeping systems to track records and account for resolved unclaimed property, but the sheer number of records that needs to be properly coded for unclaimed property tracking can lead to many more incidences of human error.

      In addition, larger companies oftentimes have greater employee turnover, which can result in a loss of institutional knowledge about unclaimed property.
    2. Due diligence: number and effectiveness of unclaimed property resources available 

      Surprisingly, the size of the company may not correlate as much as expected with the number of resources available for performing due diligence. Due diligence practices are often managed inconsistently. Both small and large companies can either have efficient resources available to streamline the due diligence process or have a lack thereof.

      Similarly, decision-makers in many different sizes of companies can either make unclaimed property a priority — or not. If it’s a priority, there likely will be fewer customer contacts needed through due diligence.

      The same principle applies across divisions of a large company. Decision-makers in certain divisions of a business may make unclaimed property a priority, while decision-makers in other areas of the business may not, which can complicate things exponentially for larger companies.

    3. Reporting: accounting complexities and consolidated subsidiaries

      Larger companies are likely to encounter complexity smaller companies never have to face. Aggregating and tracking data, for example.

      Another common issue faced by larger companies is the decision whether or not to prepare a consolidated report across all subsidiaries, or report at the level of each individual legal entity. Appropriateness of this decision depends on a variety of factors, such as the type of company and product, as well as legal conditions, such as contractual separations between entities.

      A larger company may have a number of subsidiaries for which the unclaimed property reporting process is not as efficient as they would like. Filing a consolidated report may be seen as inferring that all legal entities under the corporate umbrella are in compliance, when some of those entities may not be in compliance.

    4. Audits: the benefit of specialists and the disadvantage of massive records 

      In smaller companies, unclaimed property audit tasks are often shoehorned onto the to-do lists of employees with many other responsibilities. For this and other reasons, it can be difficult for smaller companies to defend audits. Larger companies, on the other hand, have a broader personnel base and can assign staff to focus on an audit. At the same time, a large company’s ability to decisively respond to an audit can be affected by the difficulties of navigating massive amounts of data to produce records requested by auditors.

      If recordkeeping systems aren’t centralized in a large company, it can be difficult for separate departments and personnel unfamiliar with one another to coordinate the production of records from a variety of recordkeeping systems.

      Companies of all sizes can be audited for unclaimed property by the states. However, because auditors have exhausted many large companies as potential audit targets, we are seeing an increase in the number of midsize companies receiving audit notices.

In the end, size doesn’t matter

Companies of all sizes are subject to escheat law, and all companies must determine their potential liability, get their records together and report properly. Because laws and organizations are continually changing, unclaimed property management has to be continually monitored and managed, no matter what the size of a company.

Topics: Due Diligence, Reporting, Audit, Recordkeeping