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Knee-Deep in Escheat? How to Protect Your Bottom Line

For many states, the sale of unclaimed property is a substantial source of operating funds. A recent report by California’s Legislative Analyst’s Office states that proceeds from the sale of unclaimed property represents the fifth-largest source of revenue to the state’s general fund. Subsequently, states have been stepping up their efforts to enforce unclaimed property laws as a viable alternative to increasing taxes. Subcontracting compliance examinations to third-party firms has been one of the approaches states have used to tackle enhanced enforcement of the law. This practice has caused obvious financial detriment to businesses that hold unclaimed property, particularly when audits are handled by third parties that are compensated on a contingent fee basis. The number of contingent-fee audit firms auditing on behalf of states has increased over the past few years, with each firm employing its unique practices in aggressive assertions of liability.

CFOs can protect companies’ bottom line by conducting comprehensive internal compliance self-reviews. By measuring current levels of escheat compliance and detecting sources of exposure, self-reviews can produce valuable strategies for risk management.

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