Accounting firms that perform audits need to be more aware of unclaimed property, held by clients, property that must be handled correctly and properly reported to state governments. But too often, says Thomson Reuters' Studies have found that fewer than 20 percent of custodians are in compliance with state laws. And while states cannot directly turn unclaimed property into revenue, they can claim interest generated. States can also assess penalties and interest and can also perform audits and charge the companies audit. In place, this can be $200 per day per auditor, Jundt says. There is more than $30 billion of such property in the hands of custodians.
Jundt is typically hired by companies to perform risk assessments, helping to determine if companies are filing information correction and how they would fare in audits. Thomson's staff also helps determine if there are amnesty or voluntary disclosure programs and utilizes an outsourcing company that files reports annually for clients.
The unspent amount on gift cards is a particularly important topic because of their widespread usage and the fact that so many are not used, or amounts are left unspent, say $1.34 on a $50 gift card that has been used. Some states split that money with the card issuer, using the assumption the issuer has a right to make money on gift cards. Jundt says some will let the merchant recoup 60 percent while 40 percent will fall under state custody. Small amounts may not be a problem. Utah, for example, exempts card with balances of less than $25.
Issues of Special Important to Accountants.
GAAP issues. Failure to properly account for unclaimed property liability could be in violation of Generally Accepted Accounting Principles (GAAP).
State Laws. Unclaimed property compliance is required under all states’ unclaimed property statutes.
Sarbanes-Oxley implications. SOX requirements of internal controls and certification of internal controls mean businesses must properly record unclaimed property.
