I came across a situation the other day where an organization had issued a payroll check to an employee who proceeded not to cash it and the organization had lost contact with the individual. The point of this story isn’t why they didn’t cash it (which in itself is a whole other discussion) but rather what do you do when you’ve issued a check to someone and it doesn’t get cashed, you lose touch with the person and can’t locate them regardless of the many attempts.
As tempting as it is to just void the check and forget about it, there are proper procedures that should be followed. Each state will have different rules and you should check with your specific state for details, but in the State of Maine there is the “Maine’s Unclaimed Property Act”.
In Maine, if you have property belonging to another person and you’ve held it for the required dormancy period (which ranges from 1 to 15 years depending on the property) it should be reported as unclaimed property to the state.
For specific details on the required dormancy period or how to report unclaimed property to the State of Maine visit http://maine.gov/treasurer/unclaimed_property/report_property/index.html
As for what to do in Sage MIP Fund Accounting will depend on whether it is an AP check or a Payroll Check.
If it is an AP check, you would want to void the check, referencing it as a lost check. This will clear it out of your bank reconciliation. This entry will debit cash and credit AP. Now you need to reverse the invoice. Then enter a new invoice to the Treasurer, State of Maine or your state authority referencing the unclaimed property and the appropriate information about the original check. When you cut the check to the Treasurer it will clear out AP leaving you with the net of a debit to the expense and a credit to cash.
If it is a Payroll check it is a little more complicated since you don’t want to void the check because it will impact your tax reports which were reported correctly. So you’ll need to create a journal entry debiting cash and crediting a liability such as Due to State. Then when you are ready to send the money in to the state, you’ll enter an invoice debiting the Liability “Due to State” and crediting AP. When you cut the check the AP will be debited and cash credited. You still need to clear the PR check in Bank Reconciliation, so you would clear the PR check along with the JV entry in the same month so they would net zero.