Book Pick: Unclaimed Property: A Reporting Process and Audit Survival Guide

Uncashed payroll and vendor checks, unpaid retirement account distributions, dormant A/R credit balances, uncashed stock dividends ... unclaimed property comes in a bewildering variety of forms. And companies don't have a good handle on it. Only about 10 percent of U.S. businesses are fully compliant with all of the unclaimed property laws to which they're subject, according to The Keane Organization Inc., a Philadelphia-based compliance advisory firm.

Tracey L. Reid cites government estimates that put the compliance rate potentially somewhat higher, at 10 percent to 20 percent, in her new book Unclaimed Property: A Reporting Process and Audit Survival Guide (John Wiley & Sons Inc., 2008). That still leaves the majority of companies as tempting targets for state auditors. In the past few years, states have become increasingly aggressive in their pursuit of companies that underreport or fail to report unclaimed property liabilities. With the downturn putting big dents in their budgets, it's a safe bet they won't be backing off any time soon. As Reid puts it, "When state revenue goes down, unclaimed property audit efforts go up."

So the book is certainly timely, and it's a welcome addition to the rather short list of resources for companies that want to tackle unclaimed property compliance in-house.

Reid's starting point is what she calls the 4 Myths of Unclaimed Property:

Myth 1: We don't have unclaimed property. Wrong -- all companies do. The only question is whether it's reportable.

Myth 2: Unclaimed property compliance is voluntary. No: it's mandatory in all 50 states. And some states, such as Ohio, require all businesses registered in that state to file an unclaimed property report every year, even if they don't have any property that must be transferred to the state.

Myth 3: If I don't have any records, the auditor can't determine any unclaimed property liability for my company. In fact, state auditors can use your current records to estimate past liabilities, typically going back 10 to 15 years.

Myth 4: I am only liable for reporting unclaimed property to states where I conduct business (i.e., have nexus). Unclaimed property is not a tax, it's a law, Reid points out. Where your company is incorporated may have a bearing on some aspects of your reporting requirements, but in general it's the location of the owner of the property that's key.

From there, Reid covers the basics, sketching the laws' ground rules and describing a procedure for calculating liability that addresses the crucial question: What do you do if you don't have all the records? For many readers, the chapter on preparing for and managing a state audit will be a large part of the reason for buying the book, but Reid also provides a careful treatment of the policies and procedures that companies can put in place to make compliance more of a routine and less of a fire drill.

The book also includes a bunch of forms: an unclaimed property holder questionnaire, a sample policy and procedures manual, a due diligence letter. All in all, it's a useful tool for tackling a challenge that Reid describes as "a ticking time bomb buried in your financials, ready to detonate upon audit."

Get more details here.