The 5 Ws of unclaimed property record retention

Anyone following the latest blogs and articles about unclaimed property cannot help but notice the doomsday tidings of more audits on the horizon. While this is nothing new, states need money and are looking to unclaimed property to fortify their revenue deficits.

As the risk of audits increase, corporations should continue to take proactive steps to prepare for the day that they receive unclaimed property audit notices. The following points dive into the details of record retention, which may be the most important element in preparing for an audit, second only to proper annual reporting. Implementing the following “Five Ws” in your record retention policies and practices will help to mitigate much of the heavy lifting, resource challenges and protracted duration of a typical unclaimed property audit.

Who, what, when, where and why of unclaimed property record retention

1. WHO should have oversight over the record retention responsibilities related to unclaimed property?

• The individual who oversees the reporting process should also oversee and work with the various departments that are reporting unclaimed property items to ensure that each department’s source documents are properly archived (e.g., bank records, aging reports, etc.)
• The IT department must be involved to create an archive that will not be purged based on the company’s general record retention policies. These records should ideally be kept indefinitely, but if that is not practical, then they should be kept no less than 15 years.
• The CFO, CIO, tax directors, and internal legal team or similar-level personnel should be made aware of this extended retention requirement in order to obtain the needed approvals and resources to create a dedicated, permanent unclaimed property compliance archive in the company’s internal record retention policies.

2. WHAT should be archived to support that an aged liability was properly resolved? Keep in mind that internal system notes alone are generally not regarded as sufficient proof that a liability was extinguished. The following are examples of remediation support that would be sufficient to support that a liability was resolved:

• Unclaimed property filing history that includes detailed records of line items reported as well as proof of remittances made to the jurisdictions (e.g., bank statements). This should also include due diligence letters that have been returned by addressees indicating that amounts are not owed.