CASH: UNCLAIMED AND UNCASHED CHECKS

C-173-78
ACCOUNTING MANUAL Page 1

CASH: UNCLAIMED AND UNCASHED CHECKS

Contents
Page

I. INTRODUCTION 2

II. DEFINITIONS 2

III. FOLLOW-UP ACTION 3

IV. TRANSFER OF CHECKS TO OUTSTANDING CHECK ACCOUNTS 5

V. ACCOUNTS 8

VI. WRITE-OFF OF CHECKS FROM OUTSTANDING CHECK ACCOUNTS 9

VII. REISSUANCE OF WRITTEN OFF CHECKS 11

VIII. ESCHEAT OF UNCLAIMED CASH AND NEGOTIABLE PROPERTY 11

IX. INTERNAL CONTROL 12

X. SUMMARY OF ACCOUNTING OFFICER'S RESPONSIBILITIES 13

XI. REFERENCES 14

APPENDIX I: SAMPLE OF LOCAL POLICY ON OUTSTANDING CHECKS 15

APPENDIX II: SAMPLE FOLLOW-UP LETTER 16

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CASH: UNCLAIMED AND UNCASHED CHECKS

I. INTRODUCTION

This chapter contains general procedures for the disposition

by accounting offices of unclaimed and uncashed checks.
Sections III., IV., and VI., provide the accounting officer
with considerable discretion in determining which procedures
to adopt for his or her campus. A written standard (see
example in Appendix I) should be prepared for any campus
policies that deviate from the standards set forth in this
chapter. In the absence of such a written standard, the
standards in this chapter will apply.

As a matter of policy, the University attempts to contact

payees of unclaimed and uncashed checks, in order to promote
good internal control standards.

II. DEFINITIONS

1) Outstanding check: Any University check that has not

cleared the bank, been canceled, or written off.
Outstanding checks include both uncashed and unclaimed
checks.

2) Uncashed check: A check mailed or delivered to the

payee that has not been cashed.

3) Unclaimed check: A check held by any University office

for issuance or delivery to the payee, including checks
mailed to a payee that were returned to the University.

4) Outstanding check account: The account to which (a)

old uncashed checks are credited and (b) unclaimed
checks are credited when they cannot be delivered
promptly. The timing for transferring checks to this
account is detailed in section III. below.

5) Cancel: To rescind a check by debiting cash and

crediting a clearing account, the outstanding check
account, or the account originally charged. Checks may
be canceled either by journal entry or through the
system (disbursements or payroll) from which they were
originally prepared.

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6) Redraw: To change the name of the check payee to "The

Regents of the University of California" and deposit
the check in the University's bank account, with a
debit to cash and a credit to any of the accounts
listed in 5) above for cancellations. Redrawing a
check is an alternative to canceling it when the
accounting office has the check in its possession
(provided the date is not stale).

7) Reverse: To remove a check completely from an account

by reversing the original recording entry (i.e., by
debiting cash and crediting the account originally
charged); checks may be reversed either by cancellation
or by redrawing, in cases where the payees are no
longer entitled to receive payment.

III. FOLLOW-UP ACTION

A. TIMING

Generally, since payroll checks are cashed more

promptly than vendor checks, earlier follow-up is
required. However, early follow-up is essential for
both vendor and payroll checks to insure that the payee
can be located.

The time standard for following up on uncashed and

unclaimed checks may be determined by the campus
accounting officer or according to the following
standard:

Check Type Unclaimed checks Uncashed checks

Begin follow-up monthly on checks that

have become

Vendor one six

Payroll one three

month(s) old during the preceding month.

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III. FOLLOW-UP ACTION (Cont.)

B. FOLLOW-UP EFFORT

The following guidelines should be used to determine

the amount of follow-up effort needed to contact a
payee. The dollar cut-offs may be adjusted by the
accounting officer; however, the $1,000 limit for the
maximum effort must not be raised.

Amount of Check Effort to Contact Payee

$1,000 and over Maximum effort, such as phone calls

or letters to last known location
(see Appendix II for sample
letter), consultation with the
department originating the
transaction, consulting
directories, etc.

$100 to $999 Moderate effort, including at least

one attempt to contact the payee.

$35 to $99 Effort made as time permits.

Less than $35 No effort made to contact the payee

except in certain cases, as
determined by the accounting
office.

The above follow-up action guidelines apply to both

unclaimed and uncashed checks.

C. CAMPUS PROCEDURES

The accounting officer should determine whether certain

classes of payees are less likely than others to claim
their checks and try to correct the procedures for
issuing checks to ensure that such payees claim their
checks.

The section of the accounting office that reconciles

the bank accounts should notify the section that issues
checks as soon as checks become outstanding, in
accordance with the guidelines set forth in this
chapter.

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IV. TRANSFER OF CHECKS TO OUTSTANDING CHECK ACCOUNTS

A. USE OF OUTSTANDING CHECK ACCOUNTS

Outstanding check accounts may be used in two ways: to

transfer checks to such accounts on a set schedule,
regardless of the follow-up status of individual
checks, or to credit checks to one of the outstanding
check accounts after all follow-up procedures have been
completed. The second procedure serves to clear
accounts of any checks that require further follow-up
action. Under this procedure, it may be necessary to
credit some unclaimed checks temporarily to a special
liability account, if the checks are scheduled for
cancellation but follow-up action has not yet been
completed (see Section B below). Uncashed checks
scheduled to be transferred, but on which follow-up
action is not complete, can be left on the outstanding
check list until such action is complete.

Whichever procedure is used, follow-up effort depends

on the age and amount of the checks. (See Section
IV.D. for the types of checks that can be transferred
to outstanding check accounts.)

B. SCHEDULE FOR TRANSFERRING UNCLAIMED CHECKS

As an internal control measure, unclaimed checks should

be canceled or redrawn one month after follow-up is
begun (or should have been begun). For example,
follow-up is required by section III. A. above at the
beginning of the first month following the month in
which unclaimed checks become one month old; thus,
these checks should be canceled or redrawn at the
beginning of the second following month, if the payee
has not been located. Under this procedure, unclaimed
checks are canceled or redrawn no later than 90 days
after the check date.

Unclaimed checks may be transferred either to the

outstanding check account or to a clearing account, as
explained in Section A above.

UCRS unclaimed checks and write-off activities are the

responsibility of the UCRS Office of the President
accounting office.

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IV. TRANSFER OF CHECKS TO OUTSTANDING CHECK ACCOUNTS (Cont.)

C. SCHEDULE FOR TRANSFERRING UNCASHED CHECKS

Checks may be transferred to the appropriate account at

intervals convenient to the accounting office to
prevent large numbers of old checks from accumulating
on the outstanding checks lists. It is recommended
that such transfers be made monthly, but the accounting
officer may choose other intervals, consistent with the
guidelines in this chapter.

D. CHECKS NOT TRANSFERRED

Checks listed under each fund in the chart below may

not be transferred to an outstanding check account.
Such checks are reversed out of the accounts
completely, i.e., the credit is made against the
account originally charged. The purpose of this
procedure is to insure that the funds listed below
remain in active use; checks drawn on these funds
should not be credited to General Funds because the
checks have not been cashed or claimed. At the time
the transfer entry is made, the fund number for each
check should be obtained to determine whether the check
should be reversed out or reissued.

Fund group or Fund or

type of account Account No. Explanation

Loan Funds Funds 02200- Payments from these funds

03999 are intended for students
or employees (loans only)
in need. If a check is
not cashed promptly, the
presumption must be that
Student Aid Accounts the need no longer exists
accounts 77XXXX- (often because students
79XXXX fail to register). The
accounting office,
working with the office
originating the payment,
should reverse out the
check rather than credit
it to the outstanding
check accounts.

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Endowment and Funds 04100- Checks are rarely drawn

Similar 09799 on endowment principal
Funds (except and then only by the
Principal principal Corporate Accounting
appropri- Office. (If such a check
ated from is not cashed, campus
these funds accounting should notify
for current the Endowment Section of
expenditures) the Corporate Accounting
Office.)

Once the accounting office has reversed out a Student

Aid or Loan Fund check, it should not reissue the check
without approval of the office that originated the
payment.

E. TRANSFER ENTRY

1) Unclaimed checks. To transfer an unclaimed check

to an outstanding check account, the check should
be redrawn to The Regents and deposited (see
Accounting Manual chapter D-371-12, Disbursements:
Cancellation and Redrawing of Vendor Checks, for
an explanation of the procedures for redrawing and
canceling checks). When a check is redrawn and
deposited, it clears the bank in the normal
manner; therefore, no adjustment is required to
the controlled disbursements bank account or the
outstanding check list. However, unclaimed checks
also may be transferred by the cancellation
process.

2) Uncashed checks. Since an uncashed check is not

in the possession of the accounting office, it
must be transferred to a check account through the
cancellation process. The cancellation may be
done either as a financial journal entry (form U
Fin 288) or as a vendor check adjustment (form U
Fin 100). If a financial journal entry is used,
the total amount transferred must be manually
deducted from the next controlled disbursements
reimbursement request; this deduction serves to
reduce the revolving fund bank balance by the
amount of the checks that are being transferred
(i.e., canceled). If a vendor check adjustment
form is used, the entry is processed with local

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IV. TRANSFER OF CHECKS TO OUTSTANDING CHECK ACCOUNTS (Cont.)

E. TRANSFER ENTRY (Cont.)

checks through the accounts payable system; manual

adjustment to the reimbursement request is
required only if the total amount of the checks
being canceled exceeds the offsetting total of
local checks written. For each transfer entry, a
list of checks being canceled must be sent to the
bank reconcilement service with a request to
remove these checks from the outstanding check
list.

F. INCOME TAX REPORTING

For tax reporting purposes, accounting officers should

consider uncashed and unclaimed checks to have been
received and cashed by the payee. Uncashed checks
should be canceled by journal entry or on a Vendor
Check Adjustment form with a tax code of 0 (regardless
of the original tax code) to ensure that the tax
reporting data is not removed from the Data Processing
Center (DPC) accounts payable file; unclaimed checks
may be similarly canceled or may be redrawn. Such
amounts are reportable as income because the payee has
an indefinite claim on the funds remitted to him or her
(see Section VII. below), and the University has no way
of knowing when the payee might claim these funds.
(The issuance of a tax reporting form might remind the
payee that the University owes the payee money the
payee has not claimed.)

V. ACCOUNTS

The following accounts are used for old outstanding checks:

115540 This account can be used for both vendor and

payroll checks originally charged to non-Federal
funds. If vendor and payroll checks are
separated, this account should be used for vendor
checks only.

115541 This account is used for payroll checks originally

charged to non-Federal funds, if the accounting
officer decides to keep such checks in a separate
account.

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115542 This account can be used for both vendor and

payroll checks originally charged to Federal
funds. If vendor and payroll checks are
separated, this account should be used for vendor
checks only.

115543 This account is used for payroll checks originally

charged to Federal funds, if the accounting
officer decides to keep such checks in a separate
account.

The above accounts are controlled by the DPC by the

reference number field, i.e., a separate subtotal prints in
the ledger for each reference number.

VI. WRITE-OFF OF CHECKS FROM OUTSTANDING CHECK ACCOUNTS

A. TIMING

The purpose of holding checks in an outstanding check

account, instead of crediting the checks back to the
original fund source immediately, is to ensure that
money is available to cover these checks if they are
cashed by a payee. Checks are held in the outstanding
check accounts for four years. Since a check is seldom
claimed by the payee after this time, it can be written
off; however, there is no legal significance to the
four year period.

At campus option, checks of $100 or less may be written

off one year after they have been transferred to the
outstanding check accounts.

B. NON-FEDERAL FUND SOURCE CHECKS

The procedure below governs the write-off or

cancellation of old outstanding checks originally
charged to non-Federal funds. In general, checks are
credited back to the fund source from which they were
originally drawn. However, certain checks of less than
$1,000 each (as specified in the chart below) may be
credited to Miscellaneous Income--General Funds as a
matter of accounting convenience.

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VI. WRITE-OFF OF CHECKS FROM OUTSTANDING CHECK ACCOUNTS (Cont.)

B. NON-FEDERAL FUND SOURCE CHECKS (Cont.)

Original Fund Source Fund to be Credited

Current Funds (19900- Checks of $1,000 or more:

75999 and principal Credit original fund source if
appropriated from still in existence. If not,
04100-09399) credit either Miscellaneous
Plant Funds (00300- Income--General Funds or a
01599) fund logically related to the
original source, whichever
best preserves the identity of
the original source.

Checks of less than $1,000:

Credit original fund source
or, at campus option,
Miscellaneous Income--General
Funds. The campus may adjust
the $1,000 cut-off to a lower
amount as a matter of local
policy but not to a higher
amount. The cut-off amount
may be adjusted downwards
either for all funds or for
certain funds selected by the
campus.

Agency Funds Credit original fund source in

00001-00299) all cases.

UCRS Funds Credit UCRS Miscellaneous

(90000-99995) Income account J-130331.

Loan Funds Checks drawn on these funds

(02200-03999) should not be credited to an
Endowment and Similar outstanding check account, as
Funds Principal provided in Section IV.D.
(04100-09399 above. Checks credited to
except principal such accounts in error should
appropriated) be credited back to the fund
from which they were
originally drawn.

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In transferring checks to the original fund source,

*** revenue accounts should be credited.

C. FEDERAL FUND SOURCE CHECKS

At least once a year, checks to be written off from

accounts 115542 and 115543 (for outstanding vendor and
payroll checks originally charged to Federal funds)
must be totaled for each account; one check should then
be prepared for the grand total. The check, made
payable to the order of the United States Treasury,
should be sent to:

Director
Division of Cost Allocation
Department of Health and Human Services
90 7th Street, Suite 4-600
San Francisco, CA 94103

VII. REISSUANCE OF WRITTEN OFF CHECKS

As a matter of policy, the University will reissue any

check, regardless of age or amount, for which it can be
determined from the outstanding check account, or from some
other source, that the check was never cashed or previously
reissued (except that Student Aid or Loan Fund checks should
not be reissued without the approval of the originating
office--see Section IV. D., above). Each reissuance should
be charged to the fund credited in the write-off; the
account to be charged must be determined by the accounting
officer on a case-by-case basis. If the fund is no longer
in existence, the reissuance should be charged to
Miscellaneous Income--General Funds.

VIII.ESCHEAT OF UNCLAIMED CASH AND NEGOTIABLE PROPERTY

Escheat property is defined in GASB 21 as “the reversion of

property to a government entity in the absence of legal
claimants or heirs. For purpose of this Statement, escheat
property also includes abandoned and unclaimed property.
Abandoned and unclaimed property results from the failure of
a person who is legally entitled to property to make a valid
claim against the holder of the property within a prescribed
period of time.”

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VIII. ESCHEAT OF UNCLAIMED CASH AND NEGOTIABLE PROPERTY (Cont.)

Section 1520 of the California Unclaimed Property Law

provides that all tangible personal property located in the
state and all intangible personal property, including any
income that is held or owing and that has remained unclaimed
by an owner for more than three years, shall be distributed
as unclaimed by an owner for more than three years, and
shall be escheated to the state. The University of
California, however, is exempt from the provisions of the
escheat statute pursuant to the California Code of Civil
*** Procedure (§ 2080.8). All unclaimed cash and negotiable
property which remain unclaimed after the procedures set
forth in this chapter have been followed shall become the
property of The Regents. Once an item has been sold or
auctioned by the University pursuant to its authority under
Civil Code section 2080.8, it has been reduced to cash,
which may be retained by The Regents.
IX. INTERNAL CONTROL

A. ACCOUNTING OFFICE

Duties pertaining to the handling of checks should be

divided within the accounting office. The following
guidelines for the separation of duties should be
followed to the extent possible: if it is not
practicable to separate some duties, an alternative
form of control or review must be instituted.

1) Persons who request issuance of checks should not

be authorized to issue these checks to payees. In
keeping with this rule, a person who reconciles
the old outstanding check account should not have
access to the checks that he or she requested to
be reissued.

2) The person who reconciles the bank accounts should

not also reconcile the outstanding check account
and should not have access to unclaimed or other
unpaid checks.

3) Transactions pertaining to checks, including both

cancellations and requests for issuance, should be
approved by at least one person other than the
person originating the transaction.

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B. DEPARTMENT

Each accounting officer should issue instructions to

departments covering the proper internal handling of
checks within the department. This may be done either
in the campus policy and procedures manual or in some
other appropriate format. The instructions should
specify that unclaimed checks should be returned
promptly to the accounting office.

X. SUMMARY OF ACCOUNTING OFFICER’S RESPONSIBILITIES

A. UNCLAIMED CHECKS

Ensure that unclaimed checks are returned promptly to

the accounting office from campus distribution points,
in accordance with campus instructions (see Section
VIII. B. above). Promptly cancel, or otherwise dispose
of, undelivered checks and checks mailed out and
returned to the accounting office.

B. FOLLOW-UP ON OLD OUTSTANDING CHECKS

Reconcile bank accounts promptly and distribute lists

of outstanding checks to the appropriate personnel for
follow-up.

C. CHECK DISTRIBUTION PROCEDURES

Note any deficiencies in campus procedures that result

in a disproportionately high number of checks of a
particular type or from a particular office that do not
reach the payee. Change campus procedures as necessary
to correct any deficiencies found.

D. ACCOUNTING

Transfer outstanding checks from the cash account to

the appropriate outstanding check account and clear out
such account in conformance with this chapter and
campus policy.

Since the responsibilities pertaining to the issuance

of checks are divided among different accounting office
units for internal control reasons, the accounting

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X. SUMMARY OF ACCOUNTING OFFICER’S RESPONSIBILITIES (Cont.)

D. ACCOUNTING (Cont.)

officer should designate one person to act as

coordinator for outstanding checks. The coordinator's
role is not to supervise individuals, but to insure
that the overall system is functioning as intended.

XI. REFERENCES
Accounting Manual Chapter:

C-173-15 Cash: Check Stock Control

D-371-12 Disbursements: Cancellation and Redrawing

of Vendor Checks

***

California Civil Code § 2080.8

University Counsel Lundberg, Opinion Letter Regarding the

University's Exemption from the Unclaimed Property Law,
March 17, 1998

University Counsel Barnes, Opinion Letter Regarding the

University's Exemption from the Unclaimed Property Law with
Respect to Cash and Negotiable Instruments, August 5, 2003.

Coordinator Turek, Memorandum to Medical Center Finance

Directors Regarding Credit Balance Refunds, August 8, 2005.

_______________________________________
Historical note: Accounting Manual chapter first published
10/1/72. Revised 8/1/77, 6/15/84, 8/17/90, 3/31/96, 6/30/00,
6/30/01, 12/31/03, 6/30/06, and 9/30/07; analyst--John Barrett.

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APPENDIX I: SAMPLE OF LOCAL POLICY ON OUTSTANDING CHECKS (see

Sections I. and IX.)

Accounting Office
Campus Name

ACCOUNTING OFFICE PERSONNEL:

University procedures concerning unclaimed and uncashed checks

are provided in Accounting Manual chapter C-173-78, Cash:
Unclaimed and Uncashed Checks. These procedures have been
modified as follows for our campus:

Section III--Follow-up action:

A. Timing
B. Follow-up effort

Section IV--Timing of transfer to old

outstanding check account

Section VI--Fund to be credited when

checks are written off
from old outstanding
check account

In other areas, we will follow the procedures set forth in the

aforementioned chapter.

I have appointed _______________________ as the accounting office

coordinator for unclaimed and uncashed checks. This person is
responsible for the overall system of handling these checks and
for ensuring that all responsibilities are clearly assigned;
(he/she) will help to resolve any jurisdictional problems or
disputes.

____________________________________
Accounting Officer

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APPENDIX II: SAMPLE FOLLOW-UP LETTER (see section III-B)

Accounting Office
Campus Name
Address

Name and address

of payee

A review of our records indicates that our check no. ____, dated
________, payable to you in the amount of $_________ is still
outstanding as of _________________. This check was in payment
of_______________________________________________________________
________________________________________________________________.
Please complete the section below and return this letter to me.
If you have this check, please return it for reissuance; do not
cash the check, as it will not longer be honored by our bank. If
you do not have this check, we will reissue it upon receipt of
the appropriate certification below.

____________________________________
for the Accounting Officer

----------------------------------------------------------------

I certify that the above payment is proper and is still due and
payable.

Check one:
 The original check is enclosed; please reissue.
 The original check was never received; please stop
payment on it and reissue.
 Other (explain):

___________________________ ______
Signature Date

Address (if different from above):

End.
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