Why unclaimed property lives everywhere (but is owned nowhere!)

Things get risky in business when something is everyone’s job, yet no one’s responsibility. 

Unclaimed property is no exception. 

Risks associated with unclaimed property live in every department throughout an organization, from accounts receivable to accounts payable to payroll and beyond. When it comes to owning unclaimed property as a business function, however, it’s like a proverbial hot potato rather than a defined responsibility; no one wants to touch it. In fact, it’s common to find no clear line of ownership or governance of unclaimed property within an organization. 

In this article, we’ll explain why this happens, what risks it can create, and how your business can avoid unclaimed property pitfalls. 

Why unclaimed property lives everywhere—but nowhere—in businesses 

To start, it has a bad reputation. Unclaimed property isn’t a tax, but it behaves like one, giving it, well, not the best reputation. Logically, it could live in several different departments. For example, responsibility for unclaimed property could reside within an organization’s tax department because of its similar compliance and annual reporting function. But it could also live in an organization’s AP, A/R, treasury, or shared services departments or in general accounting. 

Even after being exonerated for being a tax (it is not a tax!), unclaimed property still gets a bad reputation simply for its hefty and tedious administrative burden. This further discourages proactive ownership. 

Staffing turnover is another factor that can lead to a lack of proper unclaimed property governance. It’s common for unclaimed property to be managed by certain individuals rather than as part of a specific staff role. That means when the employee in charge of handling unclaimed property leaves, unclaimed property filings and other compliance processes can lapse. The result? Multiyear filing gaps, inconsistent practices, and significant risk exposure.  

Warning: Signs your unclaimed property is not truly governed 

In our work strengthening business’ unclaimed property processes, we’ve seen numerous signs that unclaimed property is not being owned or governed holistically. Some of the most common include: 

• Gaps in unclaimed property reporting across the organization or by property types or entities (for example, a gap in payroll unclaimed property reporting due to staffing turnover in that department). 
• Filing inconsistencies, especially after staffing changes (for example, an inexperienced staff member picking up the task of filing unclaimed property performs the task differently than the individual who left the organization). 
• A technology system change, such as a patient accounting system or enterprise resource planning system update, that takes place but fails to carry over relevant details or records related to unclaimed property. 
• A merger, acquisition, or other transaction that centralizes processes and technology but does not include unclaimed property as part of its due diligence. 

All these factors increase risk for organizations. Specifically, filing gaps and other inconsistencies can increase audit risk at a time when unclaimed property audits are already a matter of when, not if. 

In addition, reputational risks can arise when funds owed to customers are mishandled. Not returning money rightfully owed to customers is not a headline any C-suite leader wants to see. 

Strategies for achieving effective unclaimed property governance 

So how can businesses make sure unclaimed property is governed effectively? Here are a few best practices: 

• Establish an unclaimed property champion. This should be a specific role, e.g., controller, director of treasury, versus a specific individual. That will help avoid any potential negative effects of staff turnover. This person doesn’t have to do all the work but can coordinate activities related to unclaimed property, connect vital stakeholders from across the organization, and have overall accountability. 
• Build unclaimed property into due diligence for transactions such as mergers and acquisitions, during technology changes as outlined above, when opening or closing bank accounts, and when vetting third-party vendors. Make sure unclaimed property impacts are a point of conversation and a part of the due diligence checklist. 
• Standardize and centralize filing practices where possible. This is especially important for larger companies, such as health systems with multiple hospitals. In this example, to avoid gaps in communication and duplication of efforts regarding unclaimed property filings, a best practice would be to consolidate filing at the parent health system level. 

Make unclaimed property less of a burden, more of an opportunity 

Whether justified or not, unclaimed property’s reputation in business has preceded it. Many people or departments simply don’t want to take on the tedious, time-intensive administrative burden. 

At Kodiak, our unclaimed property experts have helped relieve the burden of unclaimed property from more than 2,100 companies across all industries. In addition to assisting your organization with filing and compliance support, we can help shine a light on potential cash opportunities. 

That’s right. Despite unclaimed property’s reputation as a cost center, there are opportunities available for organizations to achieve net positive results from additional savings and income. These include unclaimed property exemptions and asset recovery opportunities. Kodiak’s unclaimed property experts can help you address the risks associated with unclaimed property and reap the benefits from potential rewards, turning a cost center into a potential profit center. 

Contact our experts today to find out how your organization can make unclaimed property feel less like a hot potato—and more like a piece of cake.