Controlling unclaimed property and escheatment efforts must begin with absolute control of records. If it doesn't, your team cannot move efficiently through unclaimed property tasks, which is a waste of time and money. Perhaps most damaging, if you are audited, sloppy and difficult-to-navigate records can lead to much higher costs and assessments.
Complete and accurate customer records also prevent production of unclaimed property in the first place, which provides better service to your customers.
Common unclaimed property recordkeeping mistakes
Sloppy abandoned property recordkeeping policies and processes
The faster you can see what's going on with individual property or accounts, the less time it will take to identify and solve problems. Consider centralized accounting to make recordkeeping quick, consistent and transparent. Determine the most advantageous records format. Make sure you capture property owners' current address information. Don't forget some records might be physical.
Organizing records for convenience rather than for audit maximization
What's an auditor likely to find in a worst-case scenario? That should be a priority for recordkeeping. You might need to organize records a different way than normal accounts. Assign a taskforce to determine effective processes, so both department's needs and unclaimed practices are considered.
When you work with an outside advisor who helps with records best practices, make sure your advisor's files always match yours. This means carefully transferring records and capturing all updates on your end and theirs.
No written guidelines for unclaimed property records management
Once you've decided on records policies and procedures to benefit your organization, it's critical to create a written handbook. This serves not only as a guide for those doing the work, but also makes it easy to consistently manage records through turnovers.
Missing important unclaimed property records and/or losing them in process
Where are you likely to find unclaimed property? It's not always easy. Order a thorough assessment to identify where unclaimed property is generated. Ask personnel in all departments to support your efforts. Then set up processes to flag and move properties to holding accounts while due diligence is being done. When due diligence is complete and customers are reactivated, move the property back to regular accounting directories. If owners are still missing, move to a reportable unclaimed property directory.
Converting data from one accounting program to another.
When companies update to a new accounting software package, transaction dates often automatically update to date of conversion and transaction dates are lost. To prove dates in an audit, it's imperative to maintain historical transaction dates. Watch for other ways dates could be changed inadvertently.
Minor mistakes that cause major unclaimed property and escheatment problems
With years of experience, we've identified records problems that seem minor, but lead to serious difficulties, either in navigating records daily or in dealing with exacting demands of an auditor. Here are examples:
- Discarding or deleting records too early. Tax and other recordkeeping concerns usually require shorter retention periods than unclaimed property, in part because you have to add the dormancy period to the unclaimed property retention timeframe. A recommended record retention period might be 15 years from when a payment was issued. Discarding records too early could open your company to records extrapolation and higher assessments.
- Discarding or deleting records for property you do not report. Companies often don't realize auditors will look most closely at records you claim are exempt.
- Not controlling status indicators. Establish a clear process for indicating which records have been escheated, so they aren't accidentally re-reported. Through a standard assessment, MarketSphere once discovered a new client had previously reported and remitted the same property for three years in a row.
- Uncontrolled access to records. To research process inconsistencies, it's important to know who is accessing abandoned property records and when. This prevents personnel from moving and changing records without your knowledge. Give each person a different user ID, so you can track problems and retrain staff.
In addition, pay close attention to the technology you use to manage and backup records. In some cases, technology helps prevent mistakes and recover lost data. In other cases, it helps you reduce liabilities and achieve benefits.
Finally, install regular checks and balances to ensure accuracy and accommodate changes. This includes annual review of records and technology. Put effort in on the front end, and you'll substantially reduce the time and money it takes to manage unclaimed property throughout the year.