Internal Controls in Unclaimed Property

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Internal Controlsin Unclaimed Property

• Ken WagersACS Wagers

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Internal Controls

• The importance of internal controls
• Protect unclaimed property assets
• Protect staff
• Provide accountability
• Prepare for departmental audits

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Protecting Unclaimed Property

• Provide a series of procedures and system
  controls that prevents or limits the ability of
  departmental staff to accidentally or
  purposefully misappropriate assets

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Protect Staff

• Provide procedures and system controls that limit
  what staff members can do by themselves with
  departmental assets.

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Provide Accountability

• Procedures and system controls that provide
  accountability and traceability of all
  transactions inside and outside the system.

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Prepare for Internal Audits

• Document procedures and system controls so they
  are easily understood by users.
• Internally audit the system controls and
  procedures to make sure they are followed.

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Key Areas of Control

• Holder Receipts
• Securities Management
• Safekeeping Management
• Report Data Entry / Import and Balancing
• Claims Approval
• Claims Disbursement

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Holder Receipts

• What were trying to protect against
• Check theft or loss
• Checks applied to the wrong holder or category
• Prohibit or limit changes after the batch of
  checks is entered.

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Holder Receipts

• Deposit all receipts on the day they are
  received.
• If receipts cannot be deposited on the same day,
  receipts should be secured in an area that
  requires dual control.
• Two people open mail, and create a log of checks
  received.

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Holder Receipts

• A manual total (adding machine tape) is created
  for each batch of checks. The batch size should
  be reasonable.
• The receipts should be entered into the system by
  one person, and verified by a second.

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Securities Management

• What were trying to protect against
• Lost or stolen stock certificates
• Stock certificates deposited to the wrong
  custodian

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Securities Management

• Require or encourage holders to remit securities
  via DTC.
• When physical certificates are receipted, create
  manual total of shares in the batch.
• Certificates should be secured in an area
  requiring dual control to access.
• Deposit securities as soon as possible with your
  custodian.

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Securities Management

• Reconcile total securities received each month
  into the custodial account.
• Require dual signatures to reissue securities.
• Reconcile securities reissued from the custodial
  account each month.

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Securities Management

• Distributing Securities to Claimants
• Custodian should directly transfer securities
  whenever possible, and should do so only on
  receipt of written instructions signed by two
  approved staff members.
• If physical certificates are received by the
  department for settlement of the claim, the
  securities should be delivered by a traceable
  shipping method and require signature for
  delivery.

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Safekeeping Inventory

• What were trying to protect against
• Loss or theft of safekeeping property.
• Safekeeping property not recorded in the system.

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Safekeeping Inventory

• Receiving Safekeeping Property
• Dual control is IMPERATIVE.
• Two staff members must be present at all times
  when receiving, viewing, or inventorying
  safekeeping property.
• Safekeeping assets must be stored in an area with
  dual access control

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Safekeeping Inventory

• Receiving Safekeeping Property
• If feasible, inventory property with the holder
  who remits the assets
• State staff visit holders
• Holders bring safekeeping property to the
  department
• Compare physical inventory with the inventory
  prepared by the holder

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Safekeeping Inventory

• Appraising, auctioning safekeeping property
• Always dual control two staff members in
  addition to outside vendors
• Appraise as many items as possible
• At auction, request release of liability for
  items turned over to auctioneer.

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Safekeeping Inventory

• Distributing safekeeping property to claimants
• Arrange for pickup in the states offices
  whenever possible.
• Deliver safekeeping property via a traceable
  method, and require signature for delivery.
• Include a detailed inventory listing to the
  claimant

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Report Data Entry / Import

• What were trying to protect against
• Modifying holder reported data as it is loaded
  into the system
• Modification of data after its loaded into the
  system and the report is balanced.

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Report Data Entry / Import

• Separate system rights to enter reports from the
  right to balance reports.
• The person with the rights to balance reports
  should not have any rights to modify the items on
  the report
• Any corrections should be sent back to the
  original person who entered the report.

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Report Data Entry / Import

• Limit the right to unbalance reports.
• Require paperwork to unbalance reports and modify
  data.
• Review reports unbalanced by users, and the
  reasons why.

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Claims Approval

• What were trying to protect against
• Claims approved for the wrong claimant
• Claims approved without departmental standard
  documentation
• Claims processed and approved by a single user

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Claims Disbursement

• Payment file reconciliation
• The accounting system should return a file to the
  unclaimed property system
• Warrant / Check reconciliation
• The accounting system should provide a return
  file that contains Payee, Amount, Date and Check
  or Warrant number.

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Determining Staff Responsibilities

• Create a matrix of your staff and the work that
  must be completed.
• Assign system rights for only those areas that
  are appropriate for the persons
  responsibilities.
• Review the matrix with your Internal Audit staff
  to get their input and agreement.

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• Questions

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This presentation on internal controls is
available in the ACS Web Library
at www.acsupch.com/LibraryHome.htm