Every spring the National Association of State Treasurers hosts a Treasury Management Training Symposium. This year's Symposium was held in Orlando, Florida last week. The unclaimed property track brings together state administrators, auditors and vendors for a week of educational panels and seminars. Barganier and Associates, a corporate affiliate of NAST, attends every year to provide insight from the holders perspective. This year, the topics were generally about streamlining claims and the reporting processes. State administrators generally said that they are looking for ways to do more with less - more outreach, more claims, more audits with fewer resources.
Many states still are in the infancy of automating and streamlining the claims processes. Owner claims are often still submitted on paper and reviewed manually by claims staff. A lot of the Symposium was geared towards automating these processes, including an online claims process. States that have already implemented online processes are seeing a dramatic increase in claims and faster turn-around times for approved claims. The online systems are also reducing the number of staff hours spent on processing claims, allowing states to refocus efforts on increasing claims, holder outreach efforts, or enforcement activities.
Nebraska also began testing robocalls to owners as part of their owner outreach program. The state may 27,000 calls resulting in 3,000 additional claims. Other outreach programs included direct mail, email, and online branding. Several state administrators were looking to work with other state agencies for offsets, most notably with tax and child support agencies.
Mel Kurman, New York's audit director, has found that shortened dormancy periods will provide a short term cash boost to the states, but also increase owner claims. This provides additional burdens on the states claim processors. Overall, shortened dormancy periods may not be in the public's best interest.
Holder Reporting, Compliance and Enforcement
Like owner claims, online holder reporting was a major thread of discussion in the Symposium. Over the next few months and years, expect more states to jump on the online reporting bandwagon, currently led by Indiana, Oklahoma, and Texas. Systems are currently in development for many states and will become mandatory within 1-5 years in those states. As it is, only a handful of states will currently accept any paper reports, even for reports with only a handful of properties to report. As the states move to online reporting, they will also require electronic payment. Most states are attempting to incorporate this into their reporting systems.
Online reporting has many advantages for the states - increased security (no paper or CD reports going through the mail), quicker processing times (reports are already loaded into their systems), and better data quality (in order to successfully upload a report, it must be in the correct format). States with online reporting are currently seeing technical issues with password resets (HIPAA and other privacy laws require passwords to reset more than once a year, which is how often most holders sign in). The switch to online reporting is also requiring the states to look at their notarization requirements; many states are looking to remove this requirement from the report submission process to better accommodate reporting in the online world.
NAST, through the NAUPA committee, is currently working on standardizing owner relationship and property type codes between the states. These codes are generally left up to the state administrators and are not mandated by law; as a result, this is an area that the state administrators can really work to assist holders in the reporting process. There are 123 official property type codes under the official NAUPA II standard, but the uniformity committee found 337 in use by the states. These 337 codes had 1,130 different descriptions. 84 property codes were in use by only one state! This provides confusion for holders and state administrators alike.
In addition to questioning shortened dormancy periods, Kurman says that the states are looking for the next big property type. In the past, states have seen demutualization and life insurance policies as new sources of unclaimed property. While he would not say what the next big area is, at least in New York's eyes, he did mention several possibilities, including e-accounts, smart cards, unprocessed or unapplied ACH wire payments, and accounts receivable credits. Once a property type is identified, states may choose to select companies for audit to focus on the new properties.
There was also a renewed call for negative reports. Negative, or zero, reports are more important now, as a gap in reporting history could trigger an audit. If your company does not have any items to report in a given year, a negative report should be filed to indicate to the state that you have reviewed your books and records and otherwise fulfilled the duties required under unclaimed property statutes.
As a holder of unclaimed property, you can expect more in online reporting and payment, stricter requirements for due diligence, lower aggregate limits, and more audits. All the major audit firms were represented in Orlando and they were all lobbying state administrators for additional audit contracts. Remember, your best defense is a good offense - proactive compliance is your offense and is most likely to keep the auditors away. As much as the state administrators would like uniformity in all aspects of the law, the state legislatures will make that difficult.
Next year's conference will be in Kansas City. In addition to attending the 2015 conference, Barganier is also attending UPPO's Holder Seminar on Canadian Unclaimed Property in Toronto in July 2014. Look for more updates on our blog.