A common area of confusion among organizations is how to handle old outstanding checks on bank reconciliations. Many states have reporting requirements regarding unclaimed property (including uncashed checks). Depending on the state, uncashed checks must be turned over to the state after a designated period of time.

Below are some practical steps an organization can take to improve their processes and accounting for old outstanding checks:

• Create a formal, written policy regarding old outstanding checks. The policy should be based on current state escheat laws and should specify aging milestones with required actions. An example of such policy could be to formally contact the payee once the check is 30 days old and again at 60 days. After 90 to 120 days, the checks could be moved out of the cash account and into a liability account created specifically for old outstanding checks. A formal policy will help create efficiencies during the monthly cash reconciliation process.
• Move old outstanding checks to a liability account, in accordance with the organization’s written policy. A listing of old outstanding checks (including check number, amount, date, and payee) should be maintained which reconciles to this separate liability account. The checks should stay in this liability account until it is time to report the unclaimed property to the state.
• Report old outstanding checks to your state. The State of Delaware’s Office of Unclaimed Property has a Holder Handbook which contains instructions for reporting unclaimed property. According to Delaware’s Holder Handbook (Handbook), an uncashed check becomes reportable to the state after 5 years of dormancy. Organizations must perform due diligence and send notices to the payees of the outstanding checks 60 to 120 days before the checks become reportable to the State. The Handbook has a sample Due Diligence Letter that can be used as a reference. If no response is received from the payee, organizations must submit an unclaimed property report through the State’s secure portal. Steps to submit the report are also listed in the Handbook. The old outstanding check amounts are due at the same time as the unclaimed property report and must be remitted to the State through check, ACH payment, or wire transfer. The State maintains custody of the assets for perpetuity, until the rightful owner claims it. The State requires organizations to maintain all records related to the unclaimed property report for 10 years after the report is filed.

The State of Delaware’s unclaimed property reporting period is on a calendar year cycle (January 1^st – December 31^st). If outstanding checks reach 5 years of dormancy during the calendar year, the unclaimed property report and related payment are due by March 1^st of the following calendar year. Organizations may request an extension by submitting a “Filing extension Request” form (found in the Handbook’s appendix). The extension request must be received by the State at least 15 days prior to the original filing deadline.