The FDIC's Identification of and
Accounting
for Unclaimed Deposits Transferred to
State Unclaimed Property
Agencies
December 5, 2001
Audit Report No.
01-024
Federal Deposit
Insurance Corporation
Office of Audits
Office of Inspector
General
Washington, D.C. 20434
![]()
DATE: December 5, 2001
TO: Mitchell Glassman, Director, Division of Resolutions and
Receiverships, and Fred S. Selby, Director, Division of Finance
FROM: Russell A. Rau [Electronically produced version; original
signed by Russell A. Rau], Assistant Inspector General for Audits
SUBJECT: The FDIC's Identification of and Accounting for
Unclaimed Deposits Transferred to State Unclaimed Property Agencies
(Audit Report No. 01-024)
This report presents the results of the Office of Inspector General's
(OIG) audit of the Federal Deposit Insurance Corporation’s (FDIC)
identification of and accounting for unclaimed deposits transferred to and
due from state unclaimed property agencies. The audit objective was to
determine whether the FDIC properly identified and accounted for unclaimed
funds transferred from failed financial institutions to state unclaimed
property agencies. (Note: The District of Columbia is included in state
unclaimed property agencies that accepted unclaimed deposits.)
Specifically, the OIG reviewed the process that the FDIC’s Division of
Resolutions and Receiverships (DRR) and Division of Finance (DOF) used to
identify and account for unclaimed deposits transferred to the FDIC and
the former Resolution Trust Corporation (RTC) from institutions that
acquired failed banks and savings and loan associations. (Note: As
provided in the RTC Completion Act of 1993, the RTC went out of
existence on December 31, 1995, and the FDIC took over its functions
on January 1, 1996.) The FDIC and RTC subsequently transferred those
unclaimed deposits to appropriate state unclaimed property agencies that
accepted temporary custody of those funds for 10-year holding periods in
compliance with the 1993 unclaimed deposits amendments (UDA) to the
Federal Deposit Insurance Act. (Note: Each 10-year holding period
begins on the date that the FDIC or RTC transferred unclaimed deposits to
a state agency. The 1993 unclaimed deposits amendments, Pub. L. No.
103-44, 107 Stat. 220 (1993), amended § 12 of the Federal Deposit
Insurance Act, 12 U.S.C. § 1822(e). Appendix V provides
a copy of the 1993 unclaimed deposits amendments.) Appendix I
provides additional details on our scope and methodology.
The OIG issued a related report entitled Audit of Abandoned Assets
Held by States' Unclaimed Property Agencies (audit report
number A99-038, dated August 27, 1999). In that report, DRR and
DOF agreed with the OIG’s recommendations to implement procedures to
obtain abandoned assets belonging to the FDIC and monitor possible future
recoveries from state unclaimed property agencies related to abandoned
properties.
BACKGROUND
UDA, which became effective on June 28, 1993, amended the
Federal Deposit Insurance Act regarding procedures for owners of
unclaimed deposits to file deposit claims against failed financial
institutions. UDA provides requirements that affect the manner and time
period within which owners of unclaimed deposits may obtain funds from the
FDIC, institutions that acquired failed financial institutions, and state
unclaimed property agencies. Before UDA became effective, if account
owners did not claim their deposits from the FDIC within 18 months of
an institution's failure date, the FDIC relegated those deposits to
receivership claims with the same status as general creditors. After UDA
became effective, owners of unclaimed deposits in "window period
receiverships"—that is, those institutions that were closed between
January 1, 1989 and June 28, 1993 but not terminated as of
June 28, 1993—must claim their deposits from the FDIC before the
Corporation terminates those receiverships. To help accomplish this, the
FDIC has recently established a Web site database that contains
information on these unclaimed deposits. For institutions closed after
June 28, 1993, owners of unclaimed deposits have 18 months to
claim those funds from the FDIC or acquiring institutions. If account
owners do not claim deposits from acquiring institutions by the end of the
18-month period, the acquiring institutions must transfer all unclaimed
funds back to the FDIC, as stated in applicable deposit transfer or
purchase and assumption agreements.
For failed institutions taken into receivership after June 28,
1993 where the acquiring institutions returned unclaimed deposits to the
FDIC, the Corporation transfers unclaimed deposits to the appropriate
state unclaimed property agency. (Note: The FDIC turns over all unclaimed
United States government-owned deposits to the U. S. Treasury rather than
to state unclaimed property agencies. The FDIC transfers all other
unclaimed deposits to the state unclaimed property agencies in states that
agree to accept custody of the unclaimed deposits.) The appropriate state
is the state of the last known address of a depositor appearing in the
records of the failed financial institution. However, if a depositor’s
address cannot be identified to a state—that is, if it is a foreign
address or no address can be found—then the FDIC transfers the unclaimed
deposits to the state where the failed financial institution had its main
office. The state maintains custody of the funds in accordance with its
unclaimed property laws for 10 years from the date the FDIC
transferred the funds. After the 10-year holding period, state unclaimed
property agencies must return to the FDIC any funds that account owners
have not claimed. If state unclaimed property agencies refuse to accept
custody of the unclaimed deposits offered by the FDIC, the deposit owners
can claim funds from the FDIC until the Corporation terminates the
associated receiverships. After the FDIC terminates a receivership,
depositors cannot make further claims to recover funds that they deposited
in the associated failed financial institution.
The FDIC developed—and the RTC adopted—the Unclaimed Deposits Reporting
System (UDRS) as its automated system to comply with UDA tracking and
reporting requirements. The RTC’s Claims Bulletin 05-09 dated
September 28, 1995, and the FDIC’s Unclaimed Deposits Reporting
System User Manual, dated June 8, 1995, stated that UDRS was to
provide an automated and uniform means of complying with UDA requirements
and efficiently responding to customers. In October 1999, DOF began
recording unclaimed deposits transferred to the states in the Corporate
Accounts Receivable Management System (CARMS).
When the RTC ceased operations on December 31, 1995, the FDIC
assumed the RTC's responsibilities for unclaimed deposits related to
failed savings and loan associations in addition to its responsibilities
for unclaimed deposits related to failed banking institutions. As of
April 1, 2001, DRR had 154 receiverships that failed after
June 28, 1993 and were, therefore, subject to UDA. Accordingly, the
FDIC and former RTC may have transferred unclaimed deposits from at least
154 failed financial institutions to state unclaimed property
agencies.
RESULTS OF AUDIT
The FDIC has not effectively identified, accounted for, and monitored
unclaimed deposits transferred to state unclaimed property agencies.
Although the FDIC has policies and procedures to identify and systems to
account for unclaimed deposits, they have not been effective in ensuring
that all unclaimed deposits transferred to state unclaimed property
agencies were completely and accurately identified and recorded.
Specifically, the FDIC's systems were not complete and accurate and did
not agree on the amounts of unclaimed deposits transferred to state
unclaimed property agencies. In addition, the amounts recorded in the
FDIC's systems did not agree with amounts that state unclaimed property
agencies reported to the OIG. Moreover, the FDIC has not adequately
monitored state unclaimed property agencies to determine the amounts of
unclaimed deposits that should be returned to the FDIC at the end of
10-year holding periods. We estimate that an additional $1.4 million
could be remitted to the FDIC if additional controls are established and
consider this amount to be funds to be put to better use. This amount
represents the net difference, reduced by the percentage of state-paid
claims, between the FDIC’s records and state-reported amounts for the
34 states and the District of Columbia that responded to our
requests. Appendix IV shows the OIG’s calculation of funds to be put
to better use.
THE FDIC NEEDS TO RECONCILE ITS UNCLAIMED DEPOSITS TRACKING
SYSTEMS
The FDIC’s systems used to record unclaimed deposits—DRR's UDRS and
DOF's CARMS—contained differences in total unclaimed deposits transferred
to state unclaimed property agencies; and, therefore, the completeness,
accuracy, and reliability of the systems are questionable. The FDIC
developed UDRS as an automated means to record and track the status of all
unclaimed deposits and efficiently respond to customer inquiries. However,
because the FDIC’s and RTC’s offices did not always use UDRS to record
unclaimed deposit data or removed recorded data from the system when
offices closed, the system did not include information on all unclaimed
deposits transferred to state unclaimed property agencies. Although CARMS
included more data on unclaimed deposits than UDRS, it also was not
complete. In addition to the data maintained in UDRS and CARMS not
agreeing, both systems also reported amounts different from those that
state unclaimed property agencies reported to the OIG. Differences between
the FDIC’s internal systems and between those systems and state-reported
data make the FDIC’s data on unclaimed deposits transferred to state
unclaimed property agencies unreliable. Without reliable data, the FDIC—as
receiver for failed financial institutions—cannot ensure that states
accurately return remaining unclaimed deposits to the FDIC at the end of
the 10-year holding periods, the first of which expires in 2005.
DRR’s Inconsistent Use of UDRS Affected Efforts to Identify Unclaimed
Deposits
DRR was aware that UDRS was not complete and maintained hard-copy
documentation to support some of the unclaimed deposits not included in
that system. The differences between amounts recorded in UDRS and CARMS
are partially attributable to the inconsistent use of UDRS by the former
Western Service Center. The Western Service Center recorded unclaimed
deposits in two separate systems—UDRS and an access database. In addition,
DRR had removed some information previously recorded in UDRS from the
system when the Western Service Center closed. DRR provided the OIG with
reports from UDRS and the access database on June 15, 2001. However,
we did not analyze that documentation because for some financial
institution numbers (FIN), the reports did not break unclaimed deposits
out by state. In addition, DRR officials stated that UDRS had previously
included unclaimed deposits for the FDIC’s former Northeast Service Center
but that information was apparently removed from UDRS when that office
closed.
DRR experienced significant problems in identifying, locating, and
providing information to the OIG on unclaimed deposits transferred to
state unclaimed property agencies and did not provide data on unclaimed
deposits in a timely manner. DRR provided unclaimed deposit information on
a total of $29.6 million using various sources. Of the
$29.6 million in unclaimed deposits that the FDIC transferred to
state unclaimed property agencies based on DRR records, UDRS included data
on only $9.5 million in automated format. The remainder of the
$29.6 million was composed of $14.8 million from the former
Western Service Center available in hard-copy UDRS reports and an access
database and $5.3 million from hard-copy UDRS reports that related to
the former Northeast Service Center. In addition, some of DRR’s
information on unclaimed deposits was available by FIN only and not by
state.
A DRR official stated that the division does not consider just the
information in UDRS to be the system of record for unclaimed deposits.
Instead, he stated that the system of record includes all information
recorded in UDRS plus any information from local area network file
servers, computer disks, tapes, and hard-copy printouts.
We disagree with this position. The RTC’s Claims Bulletin 05-09,
dated September 28, 1995, and the FDIC’s Unclaimed Deposits
Reporting System User Manual, dated June 8, 1995, define UDRS as
the automated tracking and reporting system to provide an automated and
uniform means of complying with UDA. Maintaining a system of record that
includes the variety of data sources cited above contributes to unreliable
and nonuniform data and inaccurate management reporting. In addition,
maintaining information in varied forms and locations rather than a
centralized database contributed to DRR’s inability to reliably retrieve
data when needed. During our audit, DRR officials initiated a project to
reconcile UDRS, the access database, and any documentation in hard-copy
format.
DOF’s Efforts to Identify Unclaimed Deposits
In 1997, DOF recognized the significance of identifying all unclaimed
deposits transferred to state unclaimed property agencies and initiated a
project to identify and record in CARMS all unclaimed deposits that the
FDIC transferred to those agencies. DOF initiated the project by reviewing
UDRS, which as of September 30, 1998, totaled about $9 million.
Because UDRS did not contain the complete universe of unclaimed deposits,
DOF reviewed hard-copy documentation that DRR maintained. DOF also
contacted individuals within the FDIC that might have knowledge of records
that identified unclaimed deposits not included in UDRS. DOF identified
additional unclaimed deposits totaling about $20 million—for a total
of about $28.7 million—and between October 1999 and February 2000
loaded that information into CARMS. Because DOF captured all information
that it located related to unclaimed deposits into a centralized automated
database, it could readily generate reports on unclaimed deposits
transferred to state unclaimed property agencies.
Although DOF made a concerted effort to identify and record in CARMS
all unclaimed deposits that the FDIC transferred to state unclaimed
property agencies, the accuracy of CARMS as well as UDRS was still
questionable. We compared UDRS and CARMS data and identified unclaimed
deposits in UDRS that were not in CARMS. For example, UDRS showed
$27,180 in unclaimed deposits from Franklin Federal Savings
Association (FIN 1285) that were apparently transferred to the state
of Missouri. However, DOF had not recorded the Franklin Federal unclaimed
deposits in CARMS. Likewise, UDRS showed $2,562 in unclaimed deposits
from Zia New Mexico Bank (FIN 4635) that the FDIC may have
transferred to the state of New Mexico that DOF had not recorded in CARMS.
Accordingly, although CARMS data was more complete, neither UDRS nor CARMS
contained the complete universe of unclaimed deposits that the FDIC
transferred to state unclaimed property agencies. On May 31, 2001, a
DOF official requested that we provide information on the missing
unclaimed deposits to assist in correcting CARMS data. We provided that
information to DOF on June 4, 2001.
Differences in FDIC and State-Reported Totals
In addition, state unclaimed property agencies reported receiving
unclaimed deposit amounts that differed from the FDIC’s records. Of the
35 agencies that responded to our requests—34 states and the
District of Columbia—only nine reported amounts that agreed with the
FDIC’s records. However, officials from three of those nine states
requested that the OIG provide the FDIC-reported amounts to them before
they could respond to the OIG's requests. All of the 26 remaining
states that responded to our requests reported receiving unclaimed
deposits in amounts that differed—some significantly—from the amounts that
the FDIC reported transferring to those states. Specifically, those
35 responding agencies reported receiving a total of $27,844,275 in
unclaimed deposits compared to $25,934,737 that DOF's records showed the
FDIC transferring to those states. Of the 35 agencies that responded,
13 reported receiving $2,661,823 more in unclaimed deposits than the
FDIC reported transferring. Conversely, 13 reported receiving
$752,286 less in unclaimed deposits than the FDIC reported transferring.
The remaining nine of the 35 responding agencies reported
receiving the same amounts as the FDIC reported transferring. Accordingly,
the state-reported totals differed from FDIC totals recorded in CARMS by a
net difference of $1,909,537. Appendix II shows the differences
between the FDIC’s records and state-reported totals for the
34 states and the District of Columbia that responded to our
requests.
The states’ responses indicated that millions of dollars could be
available that the states should return to the FDIC at the end of the
10-year holding periods. Specifically, the District of Columbia and
34 responding state agencies reported paying $6,789,070 in claims to
account owners and holding $21,055,205, an amount that—barring any
additional claims—those entities should return to the FDIC after the
10-year holding periods end.
Table 1 shows the differences between the FDIC and state-reported
amounts for the six states with the largest reported differences.
Table 1: Comparison of
Selected FDIC and State-Reported Unclaimed Deposits
| State |
Reported by the FDIC in CARMS |
Reported by State |
Difference |
| Texas |
$ 307,476 |
$ 2,613,413 |
$(2,305,937) |
| New York |
638,328 |
280,186 |
358,142 |
| California |
13,376,734 |
13,193,214 |
183,520 |
| Maryland |
487,149 |
377,507 |
109,642 |
| West Virginia |
163,591 |
255,631 |
(92,040) |
| Florida |
3,329,556 |
3,411,804 |
(82,248) |
| Totals |
|
|
$(1,828,921) |
Note: Regarding the information presented in the table above, although
UDRS is the FDIC's automated system to record and track unclaimed
deposits, CARMS included more unclaimed deposits transferred to
states.
Source: OIG analysis of state unclaimed property agencies’ reports and
CARMS data as of December 5, 2000.
For some of the reported differences, we determined the apparent causes
for identified differences. The causes that we identified for differences
in FDIC and state-reported unclaimed deposits follow for several states
shown in table 1 above:
- CARMS showed that beginning in March 1995, the FDIC transferred
$307,476 in unclaimed deposits from 31 failed financial
institutions to the state of Texas. However, Texas reported in its
response to the OIG that it received transfers totaling $2,613,413
for 38 institutions. Texas reported receiving transfers for
7 of those 38 institutions before March 1995, which could
account for all or part of the $2,305,937 difference.
- CARMS showed that the FDIC transferred $638,328 in unclaimed
deposits from 39 failed financial institutions to the state of New
York during the period November 1995 through April 1998. However, New
York reported in its response to the OIG that it received one transfer
on July 16, 1996 for $280,186 for one institution—Columbia
Banking Federal located in Rochester, New York (FIN 1283).
Accordingly, New York acknowledged receiving unclaimed deposit funds for
only 1 of the 39 institutions reported by the FDIC, which
could account for the $358,142 difference.
- CARMS showed that the FDIC transferred $3,329,556 in unclaimed
deposits from 44 failed financial institutions to the state of
Florida. However, Florida reported in its response to the OIG that it
received $3,411,804 for the 44 institutions. The difference of
$82,248 was attributable primarily to one transfer in April 1996
for one failed institution—Hollywood Federal Savings Bank
(FIN 1298). For that institution, CARMS showed
$2,318,380 transferred while the state of Florida reported
$2,400,545—a difference of $82,165.
In addition, some states that responded indicated they had not received
unclaimed funds from the FDIC or had returned checks received to the
Corporation. For example, a state of Alaska unclaimed property office
official stated that—in addition to the unclaimed deposits confirmed to
the OIG totaling $9,899—the state received reports that the FDIC would
transfer other unclaimed deposits totaling about $161,000. However, the
unclaimed property office official stated that Alaska never received the
other unclaimed deposits. In addition, a state of Hawaii Department of
Budget and Finance official said that the state accepted only one check
for $230 from the FDIC. The official added that the state had not
accepted other checks that it received from the Corporation. However,
CARMS showed that the FDIC transferred $1,491 in unclaimed deposits
from six institutions to the state of Hawaii. As of May 31, 2001, DOF’s
Bank Account Control Unit, which was reconciling unclaimed deposits
recorded in CARMS, had identified at least $100,000 in unclaimed
deposit checks sent to state unclaimed property agencies that were not
included in CARMS. The Bank Account Control Unit had also identified at
least 78 other checks sent to state agencies that DOF had recorded in
CARMS but determined the states had not cashed the checks.
Nine of the 44 unclaimed property agencies from which the OIG
requested information did not respond to our request. Appendix III
shows those nine states and the unclaimed deposits that CARMS reported the
FDIC transferred to each one.
As previously mentioned, the net difference, reduced by the percentage
of state-paid claims, was an estimated $1.4 million. Promptly
reconciling the unclaimed deposit differences between the FDIC-reported
transfers to states and the state-reported receipts should help ensure
that the states timely and accurately return any remaining unclaimed
deposits at the end of the 10-year holding periods. Accordingly, we will
report as funds to be put to better use an estimated $1.4 million in
our Semiannual Report to the Congress as the reduced net difference
between the FDIC’s records and state-reported amounts for the
34 states and the District of Columbia that responded to our
requests. Appendix IV provides the OIG’s calculation of funds to be
put to better use.
THE FDIC NEEDS TO MONITOR UNCLAIMED DEPOSITS TRANSFERRED TO STATE
UNCLAIMED PROPERTY AGENCIES
The FDIC has not monitored unclaimed deposits that it transferred to
states to ensure that amounts remaining unclaimed at the end of the
10-year holding periods are timely and accurately returned. Monitoring of
unclaimed deposits should include obtaining certification from state
unclaimed property agencies acknowledging amounts transferred and
confirming that states received and understood the FDIC’s requests for
data on unclaimed deposits. In addition, the FDIC should periodically
follow up with the state agencies to determine the status of unclaimed
deposits and reinforce UDA requirements that states return unclaimed
deposits to the FDIC at the end of the 10-year holding periods. However,
our review of DRR’s and DOF’s correspondence files found no evidence that
the FDIC had communicated with state unclaimed property agencies since
unclaimed deposits were initially transferred to them. In addition, state
unclaimed property agencies had not voluntarily provided reports to the
FDIC. The lack of adequate and consistent monitoring could affect the
FDIC's ability to ensure that state agencies comply with the UDA
requirement to return any unclaimed funds remaining at the end of the
10-year holding periods.
The FDIC’s Claims Manual, dated March 1994, and its subsequent
revision in March 1996, provide specific guidance on the transfer of
unclaimed deposits to state unclaimed property agencies and assign
responsibility to DOF for monitoring unclaimed deposits transferred to
state agencies. The Claims Manual did not provide guidance for
DOF’s monitoring of unclaimed deposits. However, the RTC’s Claims
Bulletin 05-09, dated September 28, 1995, on unclaimed deposits
transferred under UDA states that DOF should request annual reports from
state agencies in order to monitor unclaimed deposits. Those reports could
have provided information on the amounts transferred to state unclaimed
property agencies, claims paid to deposit owners by the state agencies,
and remaining unclaimed deposits to be returned to the FDIC.
At the time the FDIC transferred unclaimed deposits to state unclaimed
property agencies, DRR forwarded letters to those agencies outlining
amounts transferred and, in some cases, provided general guidance on
requested reporting. However, DRR provided inconsistent guidance to state
unclaimed property agencies in its requests for reports. Specifically, DRR
did not provide reporting guidance to all state unclaimed property
agencies. Moreover, for those state agencies to whom DRR provided
guidance, the guidance either varied regarding when and to whom to report
or was unclear. For example:
- The FDIC transferred unclaimed deposits to the state of New Jersey
in August 1996. DRR informed New Jersey’s unclaimed property agency that
as the end of the 10-year holding period approached, an FDIC
representative would contact the state unclaimed property agency to
facilitate the return of any remaining unclaimed deposits. Our review of
DRR and DOF correspondence files indicated that there had not been any
additional communication between the state of New Jersey and the FDIC
since August 1996.
- Conversely, in April 1996, when the FDIC transferred unclaimed
deposits to the state of New York, DRR requested that New York’s
unclaimed property agency provide annual reports on the status of those
funds. In February 1997, New York requested that the FDIC provide a list
of institutions from which it had transferred unclaimed deposits to the
state of New York. However, we found no evidence of any subsequent
reporting or additional correspondence between the state of New York and
the FDIC after February 1997.
- Finally, when the FDIC transferred unclaimed deposits to the state
of California in April 1997, the transmittal letter from the FDIC
stated: ". . . the deposits must be returned to the FDIC immediately, if
not claimed by their depositors within 10 years."
Because of the inadequate or inconsistent reporting guidance that the
FDIC provided, many state unclaimed property agencies may not be aware of
UDA requirements. For instance, state unclaimed property agency officials
from five states said that they were not aware of UDA and did not know
that they were to return any remaining unclaimed deposits to the FDIC at
the end of the 10-year holding period. Some state agency officials
requested that we provide a copy of UDA to them for review because they
were not aware of its provisions or their responsibilities under UDA. For
example, before we explained the UDA requirements, one official from the
state of Wisconsin said that according to Wisconsin law, any unclaimed
deposits belong to Wisconsin residents; and, therefore, Wisconsin does not
have to return those funds to the FDIC.
In January 1998, DRR and DOF recognized that the FDIC had not
reconciled and tracked unclaimed deposits and began discussions to
determine which division should handle those responsibilities. At that
time, DRR believed that it would be necessary for the FDIC to contact
state unclaimed property officials to obtain information on unclaimed
deposits transferred to state agencies. However, we found no evidence that
DRR or DOF had contacted any states regarding unclaimed deposits that the
FDIC transferred to them under UDA.
CONCLUSIONS AND RECOMMENDATIONS
The FDIC has not effectively accounted for or monitored unclaimed
deposits transferred to state unclaimed property agencies. The FDIC should
reconcile UDRS and CARMS data on unclaimed deposits transferred to state
agencies. In addition, the FDIC should ensure that its system of record
provides an automated, uniform means of recording, tracking, and reporting
on unclaimed deposits. Further, the FDIC should reconcile its data on
unclaimed deposits transferred to state unclaimed property agencies with
the state agencies’ data. Finally, the FDIC should ensure that all states
receiving unclaimed deposits have a clear and consistent understanding of
UDA and the need for the FDIC to receive information on the status of
unclaimed deposits. Accordingly, the FDIC should periodically communicate
with state unclaimed property agencies on the status of the unclaimed
deposits transferred to those agencies. Educating state unclaimed property
agencies regarding UDA requirements and reconciling and monitoring
unclaimed deposits transferred to them should ensure that states
accurately and timely return all remaining unclaimed deposits at the end
of the 10-year holding periods that begin to expire in 2005.
In August 1999, the OIG issued a report to DOF and DRR entitled
Audit of Abandoned Assets Held by States’ Unclaimed Property Agencies
(audit report number A99-038). In that report, the OIG recommended
that the FDIC remove assets held by states’ unclaimed property agencies
from the finders fee program that DRR operated and make DOF responsible
for recovering those assets. As of May 2001, DOF's Bank Account Control
Unit had recovered about $5.3 million dollars and avoided paying
finders fees to private individuals and firms for those assets. In
recovering those assets, the Bank Account Control Unit has established
contacts at state unclaimed property agencies that would facilitate
monitoring FDIC and state-reported unclaimed deposits.
In addition, the National Association of Unclaimed Property
Administrators (NAUPA) could be an effective mechanism for the FDIC to
communicate and disseminate educational material to states regarding UDA
and the FDIC’s reporting requests for unclaimed deposits transferred to
states. NAUPA membership includes unclaimed property agency
representatives from all states and the District of Columbia. According to
NAUPA's Internet Web site, its mission is to promote and support
excellence and professionalism among those individuals charged with the
responsibilities of unclaimed property administration and compliance.
Finally, at DOF’s and DRR’s requests, we provided a list of state
unclaimed property agency officials who responded to our request for
information on unclaimed deposits. Those contacts should assist the FDIC
in providing information on UDA and FDIC requirements, obtaining
information on amounts transferred and received, and monitoring any
remaining unclaimed deposits that the states should return at the end of
the 10-year holding periods.
Accordingly, to improve the FDIC’s identification of and accounting for
unclaimed deposits transferred to state unclaimed property agencies, and
to facilitate the Corporation's monitoring of these deposits, we recommend
that the Director, DOF, in coordination with the Director, DRR, take the
following actions:
- Update both UDRS and CARMS with all unclaimed deposits that the FDIC
transferred to state unclaimed property agencies and ensure that the two
systems agree.
- Reconcile the variance between the FDIC’s unclaimed deposits
transferred to states and the state-reported unclaimed deposits
received. (We will report as funds to be put to better use the estimated
$1.4 million net variance, reduced by the percentage of state-paid
claims, between the FDIC unclaimed deposits recorded in CARMS and the
amounts reported as received by the 34 states and the District of
Columbia that responded to our requests.)
- Implement procedures to monitor unclaimed deposits transferred to
state unclaimed property agencies, including requesting annual reports
from state unclaimed property agencies.
- Provide clear, consistent guidance to state unclaimed property
agencies regarding UDA and FDIC requirements for receiving,
administering, and returning unclaimed deposits.
The Director, DRR, should take the following action:
- Maintain an accurate automated system of accounting for unclaimed
deposits transferred to state unclaimed property agencies from which
reports can be accurately and timely retrieved.
CORPORATION COMMENTS AND OIG EVALUATION
On October 1, 2001, the Director, DOF, and Director, DRR, provided
a joint written response to a draft of this report. The Directors’
response concurred with all five recommendations. We consider the
recommendations to be undispositioned and open until agreed-to corrective
actions are completed. We did not summarize the responses for those
recommendations because the actions planned or completed are identical to
those recommended. Appendix VI to this report presents the Directors’
response.
The Directors’ response disagreed with our conclusion that funds will
be put to better use if corrective action is taken. The response stated
that (1) amounts used in our calculation were based on
unsubstantiated state-provided data and (2) the funds needed to be
currently available and controlled to be classified as "funds to be put to
better use."
Regarding the concern raised about "unsubstantiated state-provided
data" in our calculation, we acknowledge that the reconciliation process
will likely identify differences in amounts to be returned—in some cases
less than initially estimated, in other cases more. However, our estimate
was based on the best information available at the time of our review and
is reasonable based on steps taken to be conservative. The estimate does
not include deposits shown in FDIC systems for states that did not respond
to the OIG’s requests. However, the reconciliation process may ultimately
identify amounts from those states that should be returned to the
FDIC.
Regarding the need for the Corporation to currently have available and
control the funds in order to classify them as "funds to be put to better
use," we disagree. The intent of the IG Act requirement to identify
funds to be put to better use is to provide a justification for the need
to take corrective actions by estimating future monetary benefit of such
action. It is unrealistic to conclude that the corrective action will not
result in an increase in deposits returned to the FDIC just because the
FDIC does not now control the deposits. We continue to believe that the
corrective actions are justified because of the likelihood that more
deposits will be returned if the actions are taken.
Based on the audit work, the OIG will report an estimated
$1.4 million as funds to be put to better use in its Semiannual
Report to the Congress.
APPENDIX I
OBJECTIVES, SCOPE, AND METHODOLOGY
The audit objective was to determine whether the FDIC properly
identified and accounted for unclaimed deposits transferred to state
unclaimed property agencies. Initially, we had two other objectives to
determine whether (1) acquiring institutions returned unclaimed
deposits to the FDIC and (2) the FDIC properly accounted for
unclaimed funds escheated to the U.S. Treasury. However, we determined
that UDA did not change the requirements for unclaimed deposits as they
relate to acquiring institutions’ responsibilities to return all unclaimed
funds back to the Corporation after 18 months. In addition, we did
not review records related to unclaimed funds transferred to, paid by, or
returned from acquiring institutions. Further, we determined that risks
related to unclaimed United States government-owned deposits are very low
because those deposits are escheated to the U. S. Treasury rather than to
state unclaimed property agencies. In a previous OIG audit of unclaimed
property, we informed other Offices of Inspector General of possible audit
issues related to United States government-owned deposits. Accordingly, we
dropped the latter objectives from our audit scope and focused on the
FDIC's process to identify and account for unclaimed deposits transferred
to state unclaimed property agencies.
To accomplish our objective, we interviewed officials in DRR’s
Receivership Management Section in Washington, D.C.; Claims Section in
Dallas, Texas; and Office of Internal Review in Washington, D.C., and
Dallas, Texas. In addition, we interviewed officials in DOF's Accounts
Receivable Unit in Washington, D.C., and Bank Account Control Unit in
Dallas, Texas. We discussed DRR’s and DOF’s policies and procedures to
identify, track, and monitor unclaimed deposits obtained from acquiring
institutions and subsequently transferred to state unclaimed property
agencies. We also discussed DRR's and DOF's systems used to record
unclaimed deposits.
We reviewed the applicable sections of the Federal Deposit Insurance
Act as amended by the UDA. In addition, we reviewed DRR’s and DOF’s
policies and procedures that implemented UDA, including DRR's Claims
Manual dated March 1994 and March 1996, DOF's Accounting Bulletin
RA-94-002 dated August 11, 1994, and the RTC's Claims Bulletin
05-09 dated September 28, 1995. We also reviewed the FDIC’s
description of a "system of record" in the FDIC Rules and Regulations,
section 2000, and DRR’s and DOF’s correspondence files related to
UDA. In addition, we reviewed the Unclaimed Deposits Reporting System
User Manual dated June 8, 1995.
We requested and obtained reports from DRR and DOF on unclaimed
deposits transferred to state unclaimed property agencies that were
recorded in their automated systems and available from other data sources.
Information that DRR provided totaled about $29.6 million in
unclaimed deposits transferred to state unclaimed property agencies. Of
that $29.6 million, approximately $9.5 million had been recorded
in DRR’s automated system. The remaining $20.1 million was available
from an access database and in hard-copy format only. DOF provided reports
from its automated system—CARMS—that documented approximately
$28.7 million in unclaimed deposits transferred to state unclaimed
property agencies.
To determine whether state unclaimed property agencies' unclaimed
deposits data agreed with the FDIC's records, the OIG sent requests to
43 states and the District of Columbia requesting information on
unclaimed deposits received from the FDIC. (Note: We mailed the initial
requests to unclaimed property agencies on December 8, 2000. We
mailed a second request on January 11, 2001 to those unclaimed
property agencies that had not responded by that date. Of the
44 unclaimed property agencies to whom we mailed requests, only
34 state agencies and the District of Columbia ultimately responded.)
Because CARMS showed more unclaimed funds transferred to state agencies
than UDRS at the time that the OIG selected its sample of state agencies
to query, we used CARMS data for selecting the states. We did not send
letters to the unclaimed property agencies in the other seven states
because they each received less than $1,000 in unclaimed deposits
according to CARMS data. We requested that each state unclaimed property
agency provide the (1) amount of unclaimed deposits received from the
FDIC, (2) total claims paid to deposit owners, and (3) dates any
remaining unclaimed deposits should be returned to the FDIC. To determine
differences in reported totals for unclaimed deposits that the FDIC sent
to state agencies, we compared amounts reported in CARMS with amounts that
state agency officials provided in response to our requests.
Based on our discussions with state unclaimed property agency
officials, some of those officials were not familiar with UDA.
Accordingly, we explained UDA requirements and provided copies of UDA for
their review. Nine of the 44 state unclaimed property agencies to
whom we sent requests did not respond to our first or second request. The
lack of response from those nine agencies was an external impairment
affecting the scope of the audit. Accordingly, we could not determine
whether differences between state and FDIC data existed for those nine
states. CARMS showed that $2,774,159 was transferred to those nine
states. Appendix III provides information on the nine states and
amounts transferred to each one based on the CARMS data.
To test the FDIC's current processes for identifying, transferring, and
monitoring unclaimed deposits, we requested unclaimed deposit information
on two recent bank failures—BestBank, which failed in July 1998, and
Keystone, which failed in September 1999. However, as of March 7,
2001, the FDIC had not transferred any unclaimed deposits to state
unclaimed property agencies for those two failed financial institutions.
Accordingly, we could not test the FDIC's current process for transferring
and tracking unclaimed deposits related to those two institutions.
We assessed DRR's and DOF's system of internal controls over unclaimed
deposits and conducted substantive tests of controls over the recording
and tracking of unclaimed deposits transferred to state agencies. The OIG
conducted the audit from November 2000 through June 2001 in accordance
with generally accepted government auditing standards.
APPENDIX II
Comparison of FDIC and State-Reported Unclaimed
Deposits
| State |
Reported by the FDIC in CARMS |
Reported by State |
Difference |
| Alabama |
$ 318,951 |
$ 358,833 |
$ (39,882) |
| Alaska |
1,759 |
9,899 |
(8,140) |
| California |
13,376,734 |
13,193,214 |
183,520 |
| Connecticut |
215,247 |
215,247 |
0 |
| District of Columbia |
18,076 |
65,964 |
(47,888) |
| Florida |
3,329,556 |
3,411,804 |
(82,248) |
| Georgia |
97,929 |
107,437 |
(9,508) |
| Hawaii |
1,491 |
230 |
1,261 |
| Idaho |
5,253 |
5,253 |
0 |
| Indiana |
9,418 |
9,418 |
0 |
| Kentucky |
1,775 |
1,704 |
71 |
| Louisiana |
358,092 |
358,092 |
0 |
| Maine |
15,860 |
48,909 |
(33,049) |
| Maryland |
487,149 |
377,507 |
109,642 |
| Michigan |
165,322 |
124,258 |
41,064 |
| Minnesota |
8,720 |
8,720 |
0 |
| Mississippi |
21,642 |
21,388 |
254 |
| Missouri |
33,104 |
57,454 |
(24,350) |
| Nebraska |
40,235 |
42,277 |
(2,042) |
| Nevada |
3,251 |
3,251 |
0 |
| New Hampshire |
53,084 |
53,084 |
0 |
| New Jersey |
1,977,802 |
1,983,740 |
(5,938) |
| New York |
638,328 |
280,186 |
358,142 |
| North Carolina |
87,211 |
86,647 |
564 |
| Ohio |
2,145,233 |
2,127,320 |
17,913 |
| Oregon |
281,103 |
281,103 |
0 |
| Rhode Island |
1,173,249 |
1,168,098 |
5,151 |
| South Carolina |
71,728 |
71,436 |
293 |
| Tennessee |
53,696 |
48,908 |
4,788 |
| Texas |
307,476 |
2,613,413 |
(2,305,937) |
| Vermont |
1,045 |
1,045 |
0 |
| Virginia |
235,246 |
244,823 |
(9,577) |
| Washington |
198,424 |
199,648 |
(1,224) |
| West Virginia |
163,591 |
255,631 |
(92,040) |
| Wisconsin |
37,957 |
8,334 |
29,623 |
| Totals |
|
|
$(1,909,537) |
Notes: Regarding information in the table above, the computed
difference is based on the variance between CARMS and state-reported
amounts because CARMS, which was based on DRR records, was more complete
than UDRS. Totals do not add due to rounding of state-reported and CARMS
data. The total difference, both positive (the FDIC reported transferring
more than 13 states reported receiving—$752,286) and negative
(13 states reported receiving more than the FDIC reported
transferring—$2,661,823), was $3,414,109. Nine states reported receiving
the same amounts that the FDIC reported transferring.
Source: OIG analysis of states' responses to OIG requests and
CARMS data as of December 5, 2000.
APPENDIX III
Unclaimed Deposits Transferred to States That Did Not Respond to OIG
Requests
| State |
Reported by the FDIC in CARMS |
| Arizona |
$ 697,736 |
| Colorado |
19,107 |
| Delaware |
123,299 |
| Illinois |
134,648 |
| Iowa |
13,678 |
| Kansas |
167,660 |
| Massachusetts |
295,407 |
| Oklahoma |
569,654 |
| Pennsylvania |
752,970 |
|
Total |
$2,774,159 |
Source: OIG analysis of CARMS data for states that did not
respond to OIG requests.
APPENDIX IV
CALCULATION OF FUNDS TO BE PUT TO BETTER USE
Recommendation 2 results in an estimated $1.4 million in
funds that the FDIC can put to better use. We based our estimate on the
amount of unclaimed deposits that the District of Columbia and
34 states that responded to our requests reported receiving.
Table 2 shows our calculation.
Table 2: OIG Calculation of Funds to Be Put to Better
Use
| State-Reported Amounts Compared to CARMS |
Reported in CARMS |
Reported by States |
Difference |
| Higher |
$ 6,738,009 |
$ 9,399,832 |
$2,661,823 |
| Lower |
18,261,515 |
17,509,230 |
(752,286) |
| Same |
935,213 |
935,213 |
0 |
| Net difference |
$1,909,537 |
| Reduction for state-paid
claims |
458,289 |
| Funds to be put to better
use |
$1,451,248 |
Notes: Regarding information in the table above, for the District of
Columbia and 34 states that responded to OIG requests,
13 reported receiving higher unclaimed deposit amounts than the FDIC
reported in CARMS. For the District of Columbia and 34 states that
responded to OIG requests, 13 reported receiving lower unclaimed
deposit amounts than the FDIC reported in CARMS. For the District of
Columbia and 34 states that responded to OIG requests,
9 reported receiving the same unclaimed deposit amounts as the FDIC
reported in CARMS. The District of Columbia and 34 states that
responded to OIG requests reported that they had paid out $6,789,070 in
claims (24 percent) of the $27,844,275 that they received from the
FDIC. We based our comparison of amounts reported in CARMS and by the
states on the total amounts sent to the states. Assuming a comparable
percentage of state-paid claims going forward, we reduced the net
difference that we identified by 24 percent to reflect additional
claims that the states could potentially pay before the 10-year holding
periods end.
Source: OIG analysis of states' responses to OIG requests and CARMS
data as of December 5, 2000.
Our estimate of funds to be put to better use is conservative because
- Deposit owners are more likely to claim their funds during the early
years of the 10-year holding periods. The FDIC transferred most
of the $27.8 million that the 34 states and the District of
Columbia reported receiving over 5 years ago. Therefore, the
majority of claims for these funds should have been received by the
states rather than the steady distribution that we have projected.
- It does not take into account any differences between CARMS and
states’ records for the nine states that did not respond to our
requests, the seven states that we did not send requests, or future
transfers to states given that it will take time for the FDIC to
reconcile its records.
- Additional unclaimed deposits could be added to states’ records as a
result of reconciliation efforts (e.g., New York reported receiving only
$280,186 for one institution while CARMS showed that the FDIC
transferred $638,328 for 39 institutions).
APPENDIX V
1993 Unclaimed Deposits Amendments to the Federal Deposit Insurance
Act
PUBLIC LAW 103-44 [H.R. 890]; June 28,
1993
UNCLAIMED DEPOSITS AT INSURED BANKS AND SAVINGS
ASSOCIATIONS
An Act to amend the Federal Deposit Insurance Act to improve the
procedures for treating unclaimed insured deposits, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. AMENDMENTS RELATING TO TREATMENT OF UNCLAIMED
DEPOSITS AT INSURED BANKS AND SAVINGS ASSOCIATIONS.
Subsection (e) of section 12 of the Federal Deposit
Insurance Act (12 U.S.C. 1822(e)) is amended to read as follows:
"(e) DISPOSITION OF UNCLAIMED Deposits.—
"(1) NOTICES.—
"(A) FIRST NOTICE.--Within 30 days after the
initiation of the payment of insured deposits under section 11(f), the
Corporation shall provide written notice to all insured depositors
that they must claim their deposit from the Corporation, or if the
deposit has been transferred to another institution, from the
transferee institution.
"(B) SECOND NOTICE.--A second notice containing this
information shall be mailed to the Corporation to all insured
depositors who have not responded to the first notice, 15 months after
the Corporation initiates such payment of insured depositors.
"(C) ADDRESS.--The notices shall be mailed to the
last known address of the depositor appearing on the records of the
insured depository institution in default.
"(2) TRANSFER TO APPROPRIATE STATE.—If an insured
depositor fails to make a claim for his, her, or its insured or
transferred deposit within 18 months after the Corporation initiates the
payment of insured deposits under section 11(f)—
"(A) any transferee institution shall refund the
deposit to the Corporation, and all rights of the depositor against
the transferee institution shall be barred; and
"(B) with the exception of United States deposits,
the Corporation shall deliver the deposit to the custody of the
appropriate State as unclaimed property, unless the appropriate State
declines to accept custody. Upon delivery to the appropriate State,
all rights of the depositor against the Corporation with respect to
the deposit shall be barred and the Corporation shall be deemed to
have made payment to the depositor for purposes of section
11(g)(1).
"(3) REFUSAL OF APPROPRIATE STATE TO ACCEPT CUSTODY.—If
the appropriate State declines to accept custody of the deposit tendered
pursuant to paragraph (2)(B), the deposit shall not be delivered to any
State, and the insured depositor shall claim the deposit from the
Corporation before the receivership is terminated, or all rights of the
depositor with respect to such deposit shall be barred.
"(4) TREATMENT OF UNITED STATES DEPOSITS.—If the
deposit is a United States deposit it shall be delivered to the
Secretary of the Treasury for deposit in the general fund of the
Treasury. Upon delivery to the Secretary of the Treasury, all rights of
the depositor against the Corporation with respect to the deposit shall
be barred and the Corporation shall be deemed to have made payment to
the depositor for purposes of section 11(g)(1).
"(5) REVERSION.—If a depositor does not claim the
deposit delivered to the custody of the appropriate State pursuant to
paragraph (2)(B) within 10 years of the date of delivery, the deposit
shall be immediately refunded to the Corporation and become its
property. All rights of the depositor against the appropriate State with
respect to such deposit shall be barred as of the date of the refund to
the Corporation.
"(6) DEFINITIONS.—For purposes of this subsection—
"(A) the term 'transferee institution' means the
insured depository institution in which the Corporation has made
available a transferred deposit pursuant to section 11(f)(l);
"(B) the term 'appropriate State' means the State to
which notice was mailed under paragraph (1)(C), except that if
the notice was not mailed to an address that is within a State it
shall mean the State in which the depository institution in default
has its main office; and
"(C) the term 'United States deposit' means an
insured or transferred deposit for which the deposit records of the
depository institution in default disclose that title to the deposit
is held by the United States, any department, agency, or
instrumentality of the Federal Government, or any officer or employee
thereof in such person's official
capacity.".
SEC. 2. EFFECTIVE DATE.
(a) IN GENERAL.--The amendments made by section 1 of
this Act shall only apply with respect to institutions for which the
Corporation has initiated the payment of insured deposits under section
11(f) of the Federal Deposit Insurance Act after the date of enactment
of this Act.
(b) SPECIAL RULE FOR RECEIVERSHIPS IN PROGRESS.—Section
12(e) of the Federal Deposit Insurance Act as in effect on the day
before the date of enactment of this Act shall apply with respect to
insured deposits in depository institutions for which the Corporation
was first appointed receiver during the period between January 1, 1989
and the date of enactment of this Act, except that such section 12(e)
shall not bar any claim made against the Corporation by an insured
depositor for an insured or transferred deposit, so long as such claim
is made prior to the termination of the receivership.
(c) INFORMATION TO STATES.--Within 120 days after the
date of enactment of this Act, the Corporation shall provide, at the
request of and for the sole use of any State, the name and last known
address of any insured depositor (as shown on the records of the
institution in default) eligible to make a claim against the Corporation
solely due to the operation of subsection (b) of this section.
(d) DEFINITION.--For purposes of this section, the term
"Corporation" means the Federal Deposit Insurance Corporation, the
Resolution Trust Corporation, or the Federal Savings and Loan Insurance
Corporation, as appropriate.
Approved June 28, 1993.
LEGISLATIVE HISTORY--H.R. 890:
CONGRESSIONAL
RECORD, Vol. 139 (1993):
Mar. 2, considered and passed House.
May 27, considered
and passed Senate, amended.
June 9, House concurred in Senate
amendments.
APPENDIX VI
CORPORATION COMMENTS
FDIC
Federal Deposit Insurance Corporation
September 26, 2001
MEMORANDUM TO: Sharon M. Smith, Deputy Assistant Inspector General
for Audits
FROM: Fred S. Selby, Director [Electronically produced version;
original signed by Fred S. Selby], Division of Finance, and Mitchell L.
Glassman, Director [Electronically produced version; original signed by
Mitchell L. Glassman], Division of Resolutions and Receiverships
SUBJECT: Response to Draft Report Entitled Audit of the FDIC's
Identification of and Accounting for Unclaimed Deposits Transferred to
State Unclaimed Property Agencies (Audit Number 00-105)
Pursuant to above subject matter, this memorandum will serve to respond
to the issues and recommendations outlined in the draft OIG Audit Report
dated August 31, 2001.
- OIG Audit Recommendation: That the Director, DOF, in
coordination with the Director, DRR, take the following action:
Update both UDRS and CARMS with all unclaimed deposits that the FDIC
transferred to state unclaimed property agencies and ensure that the two
systems agree.
Response: DOF and DRR agree with this recommendation.
Corrective Action: DOF and DRR are proceeding with their
reconciliation of UDRS and CARMS. The reconciliation of systems will be
completed by June 30, 2002. The Bank Account Control Unit (BACU) is to
be the party responsible for contacting the states and recovering
unclaimed deposits after the expiration of the 10-year holding period.
BACU is currently responsible for recovering abandoned property from
each of the states and serves as the primary contact with the states for
unclaimed or abandoned property.
- OIG Audit Recommendation: That the Director, DOF, in
coordination with the Director, DRR, take the following action:
Reconcile the variance between the FDIC's unclaimed deposits
transferred to states and the state-reported unclaimed deposits
received. (We will report as funds to be put to better use the
$1,451,248 net variance, reduced by the percentage of state-paid claims,
between the FDIC unclaimed deposits recorded in CARMS and the amounts
reported as received by the 34 states and the District of Columbia that
responded to our requests.)
Response: DOF and DRR strongly disagree with the findings of
"funds to be put to better use", but agree with the remainder of the
recommendation.
Funds To Be Put To Better Use: The OIG finding is based on
unsubstantiated state-provided data. Furthermore, the phrase 'funds to
be put to better use' implies that one has control over those funds.
These funds are not available to the FDIC and, therefore, could not be
put to better use. Based on the requirements of UDAA in conjunction with
the timing of bank failures, the earliest any funds are due to be
returned to FDIC is March 2005. This finding is not supported by the
facts.
Corrective Action: DOF BACU, with the help of DRR Claims, is
working with various states to resolve the reported variances and will
have them resolved before the March 2005 recovery start date. BACU has
identified several instances where checks sent to states were never
cashed. DOF will issue replacement checks to the states with supporting
detail of claimants.
DOF is working with the states to identify any discrepancies between
its records and amounts reported by the states to the OIG. BACU's
efforts to identify and recover abandoned funds had identified a
significant variance in the quality of record keeping systems used by
states to manage unclaimed property. The OIG survey results highlight
the difficulties in getting states to respond to inquiries. For example,
the State of Ohio said they had no record of ever receiving a payment of
$2,024,658.15 from FIN# 1303, Trans Ohio Federal Savings Bank, until we
sent them a copy of the cancelled check. The OIG schedules of funds
reported by the responding states do not provide detail as to individual
depositor amounts and, therefore, it is impossible to confirm which
remittances are included or excluded. We believe that several of the
states that did respond either included monies that had been escheated
prior to enactment of UDAA or were not able to identify all funds
remitted by FDIC as required by UDAA. For example: the OIG's survey
shows the State of Texas, Commonwealth of Virginia, and the State of
Alabama each reported funds to be returned in years 2003 and/or 2004,
well before the March 2005 date for receiving funds back from the
states. Thus, it is clear that the figures provided by some of the
states should not be relied upon to determine inaccuracies in FDIC
records.
- OIG Audit Recommendation: That the Director, DOF, in
coordination with the Director, DRR, take the following action:
Implement procedures to monitor unclaimed deposits transferred to
state unclaimed property agencies, including requesting annual reports
from state unclaimed property agencies.
Response: DOF and DRR agree with this recommendation.
Corrective Action: We agree that having procedures to monitor the
funds transferred to the states and the status of any unclaimed amounts
is desirable and will establish broad procedures in a Memorandum of
Understanding (MOU) between DOF and DRR that will be issued by March 31,
2002. Final procedures will be developed after the Receivership
Liability System (RLS) is upgraded, which is projected to be completed
by June 30, 2002. The target date for final, detailed procedures will be
September 30, 2002.
The UDAA legislation did not mandate that states provide periodic
reporting to the FDIC. The lack of mandatory interim reporting by the
states is illustrated by the OIG's inability to get all surveyed states
to respond. BACU's efforts to recover abandoned funds have identified a
significant variance in the quality and level of detail of record
keeping systems used by states to manage unclaimed property.
To establish better communication with the states' unclaimed property
departments, DOF contacted the National Association of Unclaimed
Property Administrators (NAUPA) and made arrangements for DOF and DRR to
provide a UDAA presentation at their national conference that was to be
held from September 29 to October 2, 2001. Unfortunately, the events of
September 11 have caused the conference to be canceled. These efforts to
improve relations and communications with the states will enable DOF to
obtain data on remaining amounts unclaimed.
DOF has developed a brochure that explains the UDAA legislation and
provides contacts within DOF and DRR for funds received from or due to
the FDIC. These brochures were to be handed out at the conference but
will be mailed to each state's office of unclaimed property.
Periodically, FDIC will provide the states with data from the new RLS
software to assist in identifying escheated deposits. Moreover, we will
stay in contact with the individual states and NAUPA and participate in
regional or national conferences to improve communications.
- OIG Audit Recommendation: That the Director, DOF, in
coordination with the Director, DRR, take the following action:
Provide clear, consistent guidance to state unclaimed property
agencies regarding UDA and FDIC requirements for receiving,
administering, and returning unclaimed deposits.
Response: DOF and DRR agree with this recommendation.
Corrective Action: DOF and DRR are working through the National
Association of Unclaimed Property Managers to improve relations and
communication. The development of the UDAA brochure (noted above) and
its distribution to all states will lay the groundwork for a cooperative
relationship between the states and the FDIC.
Periodically, BACU will provide the states with a schedule of
payments made with supporting detail from RLS once the enhancements
(noted below) have been implemented. This will assist the individual
states in identifying escheated deposits. It should be noted again that
states are not subject to any requirement to provide interim
reporting to the FDIC.
- OIG Audit Recommendation: The Director, DRR, should
take the following action:
Maintain an accurate automated system of accounting for unclaimed
deposits transferred to state unclaimed property agencies from which
reports can be accurately and timely retrieved.
Response: DRR agrees with this recommendation.
Corrective Action: DRR has budgeted funds for 2002 to build
functionality into the Receivership Liability System (RLS) to provide
unclaimed deposit tracking and reporting. This functionality will be
developed by a team of subject matter experts from DRR and DOF. The
programming for the new RLS functions is projected to be completed by
June 30, 2002.
At this time, DRR does not consider it efficient or effective to
convert the reconciled data into UDRS prior to developing the RLS
functionality. We have learned from experience that completing two
conversions of the same data would be costly, time consuming and counter
productive. Therefore, upon completion of the RLS programming, DRR will
convert all relevant data into RLS from either UDRS, other electronic
databases, or manual documentation. Given the expected completion dates
for the RLS updates, this conversion process will be completed by March
31, 2003. Upon completion, RLS will be the system of record for
unclaimed deposits.
Concurred:
James G. Thompson, Jr. [Electronically produced version; original
signed by James G. Thompson, Jr., on 9/26/01], Deputy Director, Division
of Finance
A. J. Felton [Electronically produced version; original signed by A. J.
Felton on 9/26/01], Deputy Director, Division of Resolutions and
Receiverships
Gail Patelunas [Electronically produced version; original signed by
Gail Patelunas on 9/28/01], Deputy Director, Division of Resolutions and
Receiverships
cc: Vijay Deshpande, Director, OICM
Giovanni Recchia, Associate
Director, DRR
Susan R. Brown, Assistant Director, DOF
Susan Whited,
Assistant Director, DRR
William R. Baucum, Financial Manager,
DOF
Stan Pawlowski, Internal Control Liaison,
DOF |
