If you’ve ever been through an unclaimed property audit, you know the feeling: a request letter arrives, you pull your files, and you realize — fast — that you’re not as prepared as you thought.
If you haven’t been through one yet, you probably will be.
State unclaimed property audits have increased in frequency and scope over the past decade. Multi-state examinations are now standard for companies of any significant size. And the states — many of them, anyway — have employed more sophisticated analytics to determine non-compliance.
I spent more than 18 years in state unclaimed property administration before joining Dunbar. I’ve sat on both sides of the table. What follows is what I learned from that time — specifically, five things the auditors know that most compliance teams don’t find out until it’s too late.
1. The audit didn’t start when the letter arrived.
By the time you receive a formal examination notice, the state has often already been watching. Most state programs use analytics to identify likely non-reporters and under-reporters before ever making contact. Industry comparisons, prior filing history, acquisition activity — all of it factors in.
This means “we’ve never been audited” is not the same as “we’re in good standing.” If your filing history has gaps, or your reported amounts look low relative to peer companies, you may already be on a list.
2. “We filed in good faith” rarely holds up.
Good faith is a defense in a lot of legal contexts. In unclaimed property, it’s almost never sufficient on its own.
The standard isn’t intent — it’s accuracy. If your dormancy trigger dates were miscalculated, if certain account types were excluded, or if your due diligence process didn’t meet the state’s standard, the penalties apply regardless of whether you were trying to do the right thing.
The gap between “we thought we were compliant” and “we were compliant” is where most audit adjustments live.
3. Multi-state exams are coordinated — but not identically.
If you’re under examination by a third-party audit firm, there’s a meaningful chance the exam was triggered or coordinated through a multi-state arrangement. What’s less understood is that states don’t apply identical standards even within the same exam cycle.
Dormancy rules in Delaware are not the same as in California. Reporting obligations for retirement accounts differ by state. A single methodology applied uniformly across all states almost always creates errors somewhere.
Auditors know this. When they find a methodology that’s been applied uniformly across all states, they look harder.
4. The documentation gaps that look minor are often the most expensive.
The largest audit adjustments rarely come from outright non-reporting. They come from documentation that can’t support the positions taken.
Can you demonstrate that due diligence letters were sent in compliance with each state’s timing and format requirements? Can you show your dormancy trigger dates with source data — not just summary reports? If a system conversion happened five years ago, do you have a reconciliation showing nothing fell through the gap?
If the answer to any of these is “probably, but it would take us a while to pull together” — that’s an audit risk.
5. Self-audits catch less than you think — but they still matter.
A well-run self-audit is genuinely valuable. It surfaces issues before the state does, demonstrates good-faith compliance efforts, and often opens the door to voluntary disclosure programs with meaningful penalty mitigation.
What a self-audit typically won’t catch: methodology errors that have been consistently applied across years. If you’ve been calculating dormancy incorrectly, your self-audit uses the same calculation. If an account type has been systematically excluded, your internal review follows the same scope.
An independent examination by someone who knows what the states look for — and specifically where companies in your industry tend to have problems — is a different exercise. It’s not about finding fault. It’s about finding exposure before the state does, when you still have options.
The bottom line:
Unclaimed property audits are not random. They are not punitive by nature. But they are consequential — and the gap between prepared and exposed is usually smaller than compliance teams realize until they’re already in one.
Dunbar’s Reporting & Consulting practice was built by people who’ve worked on both sides of this. If you’d like to understand your current exposure before the state comes looking, that’s exactly the conversation we’re here to have.
