Nonprofit News from Soft Trac

I came across a situation the other day where an organization had issued a payroll check to an employee who proceeded to not 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 thought) 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 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 debit to the expense and a credit to cash.

If it is a Payroll check it’s a little more complicated as you can’t void the check because it will impact your tax reports and those 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.