Guide to Unclaimed Property
Audits, Internal Control and Record Retention
Refer to North Carolina General Statutes §116B-72 – Request for reports and examination of records
& §116B-73 – Retention of records
Organizations holding unclaimed property are required to report annually and to maintain unclaimed
property records in the event of an audit. Special internal controls are needed for unclaimed property in
order to safeguard the funds prior to reporting.
AUDITING
As allowed by law, selected holders’ records are examined for compliance with the Unclaimed Property
Law. Once an examination is assigned to an auditor, the following steps occur:
Preliminary Work
1. An auditor contacts the holder to arrange a mutually agreeable date, discuss company
structure and location of records, to arrange for a liaison, and to determine the records
needed to conduct the examination.
2. A letter is sent to confirm the audit date and request records.
On-Site Work
1. An opening conference is held at the holder’s place of business. This opening conference
allows the auditor and holder to ask basic questions and exchange information about the
audit.
2. All examination work is conducted on-site. This work can last a few days to several weeks
depending on the size and type of holder and the availability of records. An average audit
requires approximately three days of on-site work.
3. At the conclusion of the on-site work the auditor presents preliminary findings at an exit
conference. The holder is allowed 30-120 days to complete required research and gather
more records if needed. Refunds and adjustments to the preliminary findings can be made
based on this additional information.
4. A report is then issued by the auditor and a formal request for the property in question is
made of the holder.
Appeal Procedures
1. If there is disagreement, the holder is asked to respond in writing.
3200 Atlantic Avenue • Raleigh, North Carolina 27604
Telephone: (919) 814-4200 • Fax: (919) 855-5811 • www.NCCash.com
2. If the holder or holder’s representative and the auditor cannot reach an agreement, a
meeting is arranged with the Unclaimed Property Audit Director or Business Manager.
3. If the disagreement in unable to be resolved, the audit file is turned over to the Unclaimed
Property Administrator and Assistant Attorney General representative to bring action in court.
If you would like answers to your questions, you can request that one of our representatives visit your
organization to help bring your company into compliance. A visit usually lasts a few hours.
AUDIT SELECTION PROCESS
To the extent possible, North Carolina compliance procedures are designed to encourage voluntary
reporting rather than audits. If a company appears to be in non-compliance, a formal letter is sent
requesting the holder voluntarily report and remit by a specific due date.
If there is no response by the specified date the holder will be contacted by phone to discuss the law,
records required, and typical property types; or to set up an unclaimed property field audit.
The following criteria are considered when selecting an organization for examination:
1. Size and type of organization
2. Reporting history of the organization
3. Smaller than expected volume or missed property types
INTERNAL CONTROL
Unclaimed property can present a strong temptation for embezzlement and fraud, and therefore, special
internal controls are needed for unclaimed property to safeguard the funds prior to reporting.
Organizations sometimes shortcut important internal controls because they believe the unclaimed
property amounts are immaterial, or believe their regular internal controls are adequate. Strong internal
controls and periodic internal auditing can prevent needless problems or damage to an organization’s
reputation. Frauds and defalcations are often only detected because of the carelessness of the
perpetrator. The lack of proper internal controls is the most common reason fraud occurs.
RECOMMENDATIONS
Set up a liability account to track unclaimed property until it becomes reportable. Ensure procedures
include the documentation amounts entering and exiting the liability account. For example, most banks
require two signatures for any transaction to occur to an unclaimed property account. Send a monthly
transaction report to a third person who can independently verify that the transactions appear to be
legitimate.
Maintain dual control over your unclaimed property to prevent potential employee manipulation. In
addition, it is important to separate the duties of tracking and reporting unclaimed property from that of
issuing refund checks.
NC Dept. of State Treasurer -revised 6/13/17
2
Request an internal auditor verify amounts held in your unclaimed property liability account. These
records should be verified back to the source records and up to the unclaimed property reports.
RECORD RETENTION
In accordance with North Carolina General Statute §116B-73, for reports filed after July 16, 2012,
holders must retain supporting documentation for five years after filing the report. For reports prior to
July 16, 2012, such records must be retained for ten years. Records showing the state and date of
issue for Traveler’s checks, money orders or similar instruments, are to be for three years after filing the
report.
There are no special recordkeeping requirements for unclaimed property. As an audit trail and internal
control measure, consider maintaining documentation supporting any refund or adjustment to your
unclaimed property liability account.
NC Dept. of State Treasurer -revised 6/13/17
3