Report LA00-30

Results in Brief

The Division has improved its process for identifying, collecting, returning, and administering unclaimed property. However, further improvements are needed. For instance, unreliable property records contributed to the Division completing only four audits in fiscal year 2000 and selling millions of dollars of securities after the required sales date. Audits help ensure holders of unclaimed property comply with the state’s reporting requirements. Untimely securities sales resulted in the state losing thousands of dollars of interest earnings. Furthermore, inappropriate year-end accounting entries resulted in understating the General Fund’s assets. Most of these problems could have been avoided if the Division had implemented prior audit recommendations.

Principal Findings

· In our prior audit, we recommended the Division reconcile property records to ensure all property is accounted for. However, reconciliation procedures have not been implemented. As a result, $38,000 of property collections were not recorded when received. Incomplete property records contributed to the Division performing fewer audits and selling securities untimely.

· Audits of entities holding unclaimed property are a key procedure for identifying and collecting unclaimed property. Because of incomplete property records, the Division did not conduct audits for several months in fiscal year 2000. As a result, the Division completed only four audits during the fiscal year. Prior to fiscal year 2000, the Division averaged 21 audits per year and collected approximately $35,000 per audit. An additional $485,000 may have been collected in fiscal year 2000, had the Division maintained the same level of audit coverage as in past years.

· In our prior audit we recommended the Division sell unclaimed property within 1 year after collection, as required by law. However, the Division held more than $3.5 million of securities for more than 1 year. As a result, the State lost at least $50,000 in interest earnings.

· The Division uses the services of a broker to sell securities. However, the Division does not have a contract for these services. During fiscal year 2000, the broker received $29,000 in sales commissions. Without a contract, the Division lacks assurance it received the most cost-effective service for selling securities.

· Year-end transactions were not properly recorded in the Abandoned Property Trust Fund. Approximately $1.3 million of fiscal year 2000 revenue was recorded to fiscal year 2001. In addition, about $256,000 of fiscal year 2000 expenditures were recorded to fiscal year 1999. As a result, the General Fund’s assets are understated by approximately $1 million in the state’s fiscal year 2000 accounting records.

Department or Business and Industry

Division of Unclaimed Property

Agency Response

to Audit Recommendations

Recommendation

Number Accepted Rejected

1 Periodically reconcile property management records with accounting

records. ___X____ _______

2 Maintain an adequate level of audit coverage. ___X____ _______

3 Implement procedures to help ensure securities are sold timely. ___X____ _______

4 Implement contract monitoring procedures and ensure services are

procured through a competitive process. ___X____ _______

5 Ensure Abandoned Property Trust Fund transactions are recorded to the

correct fiscal year. ___X____ _______

6 Ensure information clearly identifies the entity responsible for the

administrative oversight of the state’s unclaimed property program. ___X____ _______

TOTALS ___6____ ___0____