This post by Gail Warner, President of Keane Unclaimed Property, appeared on Keane Unclaimed Property’s corporate blog, “KeaneObservations” written by Peter Teuten, Keane Unclaimed Property’s risk management expert.
I’m picking up where Peter left off last week regarding the topic of unclaimed property audit and how it relates to risk management and compliance.
The words audit and risk go hand in hand. The word “audit” alone makes anyone in a corporate finance or risk management department cringe and begin vigorous preparations (and palpitations!). But in the case of an unclaimed property audit, that natural reaction tends to be a mix of confusion and uncertainty. It’s much more important now that companies understand the drivers of unclaimed property risk because audits are on the rise. Depending on state laws (and the extent of some state’s budget woes), unclaimed property offers states an attractive source of alternate capital (you see, much of the money states collect from companies is often used on state programs that would otherwise not happen or would require the use of additional tax dollars).
Compliance and audit resources will continue to be under a heavy burden. The question is not “if” a company will get selected for an unclaimed property audit, but rather when, and then how prepared will they be? Most companies remain unprepared for this eventuality, even as their own capital resources have become increasingly crucial to survival. Every dollar matters right now – and companies must do everything in their power to mitigate unnecessary costs that can result from fines, fees and continued audits.
However as with any audit, preparation, understanding and attention to detail are absolute musts. Measuring your risk level through an assessment, therefore, is the first thing that needs to happen (and the thing companies are least likely to understand how to do!). The good news is there are ways to mitigate your company’s liabilities to reduce the risk of audit in the first place. As with any risk, proactively managing the issue ahead of an audit can mean significantly reducing cost, time and resources.
Not surprisingly the companies that have put the proper controls and review processes in place are the ones who stay out of trouble. I’ll talk in more detail in later posts about unclaimed property compliance, audits and regulations, and offer some examples of companies that are effectively managing this issue.
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