Unclaimed Funds Audits on the Rise

The Ohio Department of Commerce's Unclaimed Funds division seems to be stepping up their audit efforts. We are hearing that more businesses are starting to receive audit letters.

Unclaimed Funds – what is that? Some background information about unclaimed funds; all businesses located or operating in Ohio must file an annual report of unclaimed funds with the State by November 1st. An automatic extension of time to file for 120 days can be obtained by completing an extension form. Even if you do not have any unclaimed funds to report, a negative report must be filed. Unclaimed funds reports can be filed electronically through the Ohio Business Gateway.

The list of property considered unclaimed funds is expansive, but for most businesses unclaimed funds primarily involves outstanding checks – checks that you've issued but have not been cashed by the recipient. These may be payroll checks, refunds to customers, and other vendor checks. There are some exemptions – payroll checks less than $50.00, unclaimed gift certificates, and business to business transactions (payments to suppliers, etc). There are different periods of time that the check must be outstanding to be considered a dormant account – for example, payroll checks more than 1 year old are considered dormant, but credit refund checks to customers are not dormant until they are 3 years old. When a dormant account is identified, the first step of the process is to send the recipient an OUF-8 notice. Allow the recipient at least 30 days to respond; if no response is received, the account should be included in your next unclaimed funds report and the money remitted to the State.

What you can do to make an audit easier. Most of the audits that we are seeing and hearing about are going to larger businesses – naturally the chance of them having unclaimed funds is higher than a small operation. However, any business can be audited and it's important to be prepared. Good bookkeeping practices and procedures can make an audit go much smoother. Reconcile your bank accounts on a regular monthly basis and monitor your outstanding payments. If you notice a check has been outstanding for an extended period of time, follow up with the payee until the check clears. Also, keep paper records for a sufficient period of time; accounts receivable ledgers and schedules should be retained for at least 6 years, bank statements for at least 3 years, and payroll records for at least 4 years. Sometimes the unclaimed funds audits will request information going back several years, so it's important to keep good records.

Please contact our office with any questions.