Unclaimed property: What accounts payable teams need to know to minimize bad outcomes in the annual compliance process

While nearly all organizations need to be thinking about unclaimed property, it is often the accounts payable (AP) team that sees the issues first. Principal Jim Sadik shared key insights in how to minimize bad outcomes during the annual compliance process during our session at the Institute of Finance & Management’s (IOFM) 2023 APP2P Spring Conference & Expo.  

The top 4 issues AP teams should be aware of that might create financial risks in complying with annual reporting requirements are: 

1. The inclusion of past due unclaimed property on annual filing reports exposes holders to potential interest and penalties, which can amount to material unfunded obligations depending on the jurisdictions involved. Companies should carefully consider their options before simply reporting past due property and hoping that states will automatically grant waivers. 
2. Filing smaller or negative reports just for the sake of filing something, or filing only obvious or specific types of property, can impact a company’s ability to take advantage of waiver opportunities that may be offered by certain states. 
3. M&A transactions raise issues pertaining to predecessor company obligations that may become the responsibility of the buyer, and the passage of time will impact the ability of a buyer to resolve them, especially when considering record retention issues, staffing changes, and a lack of awareness of an acquired company’s compliance history. 
4. How paying careful attention to voluntary settlement opportunities may offer relief from the worst possible punitive application of late reporting fines and interest penalties. 

Additionally, below are some frequently asked questions from AP teams regarding unclaimed property:  

Q: How long should a company maintain supporting documentation in the event a company is ever audited for unclaimed property? 

A: A general rule of thumb is to maintain accounting, treasury, due diligence and unclaimed property reporting documentation for 15 years to cover a reporting period of 10 years for jurisdictions with a 5 year dormancy period. This meets the provisions of both Delaware and the guidelines in the Revised Uniform Unclaimed Property Act (RUUPA) of 2016.