Overview
During our audit, we identified seven cases that had a combined total of $58,018 in escrow funds sent to the Office of the State Treasurer’s Unclaimed Property Division (UPD) more than three years after they were closed. (The shortest duration was three years and six months; the longest was five years and one month.) LCD also did not notify real estate stakeholders 60 days before abandonment in four of these seven cases. In those four cases, the stakeholders were notified one day before the funds were sent to UPD.
Not transferring funds to UPD cost LCD time and resources to maintain the funds. In addition, because LCD did not allow the real estate stakeholders enough time to take necessary action to retrieve their funds from LCD, now the stakeholders must file additional paperwork to retrieve their funds from UPD.
Authoritative Guidance
Section 3.9 of the Executive Office of the Trial Court’s (EOTC’s) Fiscal Systems Manual states that funds that are unclaimed and held by the court for three years after the related cases are closed must be submitted to UPD in accordance with Section 6 of Chapter 200A of the Massachusetts General Laws, which states,
Monies paid into any court within the commonwealth for distribution, and the increments thereof, shall be presumed abandoned if not claimed within three years after the date of payment into court, or as soon after the three year period as all claims filed in connection with it have been disallowed or settled by the court.
Section 3.9 of the Fiscal Systems Manual states,
No less than 60 days prior to the funds being transmitted to the Abandoned Property Division of the State Treasurer’s Office, a letter must be sent notifying the party the funds will be abandoned.
Reason for Issue
LCD officials told us that they had not fully understood the timing of notifications to real estate stakeholders before transferring escrow funds to UPD. In addition, LCD did not have its own written procedures for abandoned escrow accounts.
Recommendations
- LCD should establish and implement procedures for abandoned escrow account funds.
- LCD should notify real estate stakeholders 60 days before transferring property to UPD.
Auditee’s Response
Land Court has implemented or reinforced policies to ensure adherence with Executive Office of the Trial Court policies and procedures ~
Escrow Accounts:
- §1.9 Docketing and Receipting Escrow/Custodial Accounts
- §3.6.2 Central Bank Held Escrow
- §3.6.3 Separate Bank Held Escrow Holding Account Disbursements
- §3.9 Abandoned Property including §6 of the Mass General Law 200A
Seven (7) escrow accounts were reviewed:
a. One (1) escrow account case had a negligible balance of $2.30 cents for unclaimed interest,
b. One (1) escrow account case was set on the docket for a status conference and thus was not ripe for escheating [the government taking ownership of unclaimed property], and
c. Five (5) escrow account cases were not in compliance with the escheat timeline. The Pandemic interfered with the process as four (4) cases fell into the 2020 calendar for escheating with judgments on 4/20/17, 6/20/17, 9/13/17 and 10/25/17.
The Head Account Clerk has implemented a tracking system including a MassCourts tickler to trigger:
- Notice to the party that the escheat process will be completed on a date certain
- Escheat process—3 years from the decision.
Auditor’s Reply
Based on its response, LCD is taking steps to address this issue.
| Date published: | March 31, 2022 |
|---|