Can the Arkansas Auditor of State deposit unclaimed property trust funds with the State Treasurer for investment purposes?
Plain-English summary
When property gets abandoned (forgotten bank accounts, uncashed paychecks, unclaimed insurance benefits), Arkansas holders are required to turn it over to the Auditor of State, who acts as custodian until the rightful owner shows up. The cash component sits in a trust fund called the Unclaimed Property Proceeds Trust Fund.
State Auditor Andrea Lea asked the AG: can that trust fund money be parked with the State Treasurer's investment program (the State Treasury Money Management Trust) to earn returns? The AG concluded the answer was almost certainly no.
Two statutory roadblocks drove the answer:
- Where the trust fund must live. Ark. Code Ann. § 18-28-213(a) requires unclaimed property funds to be deposited "into accounts in one (1) or more financial institutions" and "administered in accordance with the laws of this state pertaining to the appropriation, administration, and expenditure of cash funds." Cash funds are defined at § 19-4-801(1) as moneys "not on deposit with or in the trust of the Treasurer of State." The legislature explicitly told the Auditor to keep the money outside the Treasury.
- Who can use the Money Management Trust. Ark. Code Ann. § 19-3-603 lists the entities authorized to deposit money with the State Treasurer's investment trust: state agency cash funds, local governments, and the Treasurer of State. The Auditor of State is constitutionally a separate office from a "state agency" (§ 19-4-801(2)(B) excludes constitutional officers from the definition), so the Auditor is not on the list.
The bottom line: the Auditor's office had to find a different home for unclaimed property funds and could not piggy-back on the Treasurer's investment vehicle without legislative action.
Currency note
This opinion was issued in 2017. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Background and statutory framework
The Unclaimed Property Act. Ark. Code Ann. § 18-28-201 et seq. requires "holders" (banks, employers, insurers, utilities) to report and turn over abandoned property to the Auditor of State. The Auditor takes custody, holds the property for the rightful owner indefinitely, and pays claims when owners come forward. Each fiscal year, the Auditor transfers a portion of the proceeds to counties, the State Central Services Fund, and general revenues under § 18-28-213(b)–(c).
The trust fund's deposit rules. Section 18-28-213(a) is unusually explicit:
All funds received under this subchapter, including the proceeds from the sale of abandoned property, shall be deposited by the administrator into a special trust fund to be known as the "Unclaimed Property Proceeds Trust Fund" ... Such funds shall be deposited into accounts in one (1) or more financial institutions authorized to do business in this state to be administered in accordance with the laws of this state pertaining to the appropriation, administration, and expenditure of cash funds.
The reference to "cash funds" sends the reader to § 19-4-801(1), which defines cash funds as moneys "not on deposit with or in the trust of the Treasurer of State." That phrase is doing the heavy lifting in the AG's analysis.
The State Treasury Money Management Trust. Ark. Code Ann. §§ 19-3-601 to 606 (as amended by Act 296 of 2017) establish the Money Management Trust, an investment vehicle administered by the State Treasurer "for the deposit of moneys in order to permit the joint investment of participants' money so as to enhance investment opportunities and earnings." Section 19-3-603 lists who may deposit money there:
- State agency cash funds (as defined in § 19-4-801);
- Local governments and their instrumentalities; and
- The Treasurer of State, with State Treasury funds not committed to certificates of deposit.
The list is exhaustive. The Auditor of State is a constitutional officer, not a "state agency" under § 19-4-801(2)(B), so the Auditor cannot invoke the first category to deposit unclaimed property funds.
The AG's reasoning
The AG identified two independent reasons the answer was no.
First: cash funds cannot be on deposit with the Treasurer. Section 18-28-213 directs the Auditor to administer the Unclaimed Property Proceeds Trust Fund "in accordance with the laws of this state pertaining to the appropriation, administration, and expenditure of cash funds." Section 19-4-801(1) defines cash funds as moneys "not on deposit with or in the trust of the Treasurer of State." The two provisions read together compelled the conclusion that the legislature wanted unclaimed property funds outside the Treasury. Putting them in the Money Management Trust (which the Treasurer administers) would contradict the deposit rule on its face.
Second: the Auditor is not on the eligible-depositors list. Even if the cash-funds prohibition could be reconciled, § 19-3-603 lists who may deposit funds into the Money Management Trust for investment. The Auditor of State is not a "state agency" because § 19-4-801(2)(B) carves out constitutional officers from that definition. The Auditor is also not a local government, and obviously is not the Treasurer. None of the listed categories fit, and the AG declined to read an unenumerated category into the statute.
The AG conceded the issue was "not entirely free from doubt" but concluded that under current law, the answer was no.
Common questions
Why does the Auditor hold unclaimed property and not the Treasurer?
Arkansas's structure puts unclaimed property under the constitutional Auditor of State, who acts as custodian for the absent owners. The Treasurer holds general state funds. The legislature created two distinct custodianships and (this opinion concluded) did not intend them to merge.
What was the Auditor trying to accomplish?
The opinion does not say in detail, but the question implies the office wanted the trust fund to earn investment returns rather than sit in checking accounts at financial institutions. The AG suggested any change would require legislative authorization.
Could the legislature have changed this?
Yes. The opinion was a reading of the statutes as they stood in 2017. The General Assembly could amend either § 18-28-213, § 19-3-603, or § 19-4-801 to authorize the Auditor to invest unclaimed property funds through the Treasurer's program.
Did Act 296 of 2017 change anything for unclaimed property?
Act 296 amended the Money Management Trust Act, but according to the AG it did not add the Auditor of State to the list of authorized depositors at § 19-3-603. The opinion's analysis incorporates the post-Act 296 version of those sections.
Source
Original opinion text
Opinion No. 2017-058
August 17, 2017
The Honorable Andrea Lea
Auditor of State
500 Woodlane Street, Suite 230
Little Rock, AR 72201
Dear Auditor Lea:
This is in response to your request for my opinion on the following question concerning trust funds that you administer pursuant to the Unclaimed Property Act (Ark. Code Ann. § 18-28-201 et seq. (Repl. 2015)):
Can unclaimed property funds be deposited with the State Treasurer for investment purposes?
RESPONSE
I believe the answer to this question is in all likelihood "no" under current law.
DISCUSSION
The Unclaimed Property Act ("the Act") establishes a scheme under which holders of unclaimed property must report and turn over such property to the Auditor of State, who assumes custody and responsibility for the safekeeping of the property for the owner's benefit. Funds that are received by the Auditor under the Act are to be deposited in a special trust fund and administered as follows:
All funds received under this subchapter, including the proceeds from the sale of abandoned property, shall be deposited by the administrator into a special trust fund to be known as the "Unclaimed Property Proceeds Trust Fund", from which he or she shall make prompt payment of claims duly allowed by him or her as hereinafter provided. Such funds shall be deposited into accounts in one (1) or more financial institutions authorized to do business in this state to be administered in accordance with the laws of this state pertaining to the appropriation, administration, and expenditure of cash funds....
This statute plainly requires that funds comprising the Unclaimed Property Proceeds Trust Fund are to be deposited into accounts in one or more financial institutions and "administered in accordance with the laws of this state pertaining to the appropriation, administration, and expenditure of cash funds." (Emphasis added). In my opinion, this statute's meaning is that the Unclaimed Property Proceeds Trust Fund not be on deposit with or held in the trust of the State Treasurer. This reasonably follows from the general law governing the budgeting and expenditure of "cash funds." By definition, state agency "cash funds" are "not on deposit with or in the trust of the Treasurer of State[.]" And while "state agency" as defined under this law does not include the Auditor of State, section 18-28-213 provides that the Unclaimed Property Proceeds Trust Fund is to be administered in accordance with this law. In short, the General Assembly has expressed its intent that moneys in the Trust Fund be on deposit outside the State Treasury.
I have considered in this regard one possible source of authority for depositing unclaimed property funds with the State Treasurer for investment purposes. The State Treasury Money Trust Management Act (codified at Ark. Code Ann. §§ 19-3-601-606 (Repl. 2016), as amended by Acts 2017, No. 296), creates the State Treasury Money Management Trust ("Money Management Trust"). This Money Management Trust is administered by the State Treasurer for investment purposes:
The purpose of this subchapter is to create the State Treasury Money Management Trust administered by the Treasurer of State for the deposit of moneys in order to permit the joint investment of participants' money so as to enhance investment opportunities and earnings.
The subchapter designates entities that may "deposit money to the State Treasury Money Management Trust for purpose of investment." Included within this designation are "[s]tate agency's cash funds as defined in § 19-4-801." State agencies, therefore, have the option, in the course of administering their cash funds, to deposit such funds into the Money Management Trust for investment purposes. It might be contended that this option extends to unclaimed property funds because, as noted above, section 18-28-213 directs the Auditor to administer those funds in accordance with state laws pertaining to "the appropriation, administration, and expenditure of cash funds."
But there are two problems with this interpretation. First, funds deposited to the Money Management Trust are on deposit with the State Treasurer, who is in charge of its administration. Yet as explained above, unclaimed property funds are to be administered as cash funds; and cash funds by definition are "not on deposit with or in the trust of the Treasurer of State." Indeed, they must be deposited into accounts at one or more financial institutions. Second, the Money Management Trust Act specifically identifies the entities that may "deposit money to the ... Money Management Trust for ... investment":
Any entity listed below may deposit money to the State Treasury Money Management Trust for the purpose of investment:
(1) State agency's cash funds as defined in § 19-4-801;
(2) Local governments:
(A) Any city, county, school district, or community college district of this state; and
(B) Any department, instrumentality, or agency of these entities; and
(3) The Treasurer of State may invest in the State Treasury Money Management Trust to the extent State Treasury funds are not being utilized for certificates of deposit under the State Treasury Certificate of Deposit Investment Program or for trust certificates of deposit pursuant to the State Treasury Management Law, § 19-3-501 et seq.
The Auditor of State is not included among the specified entities because the Auditor is not a "state agency" under section 19-4-801. The plain language of the Money Management Trust Act thus does not support the proposition that the Auditor has the option of depositing unclaimed property funds into the Trust for investment purposes.
In response to your specific question, therefore, although the issue is not entirely free from doubt, it is my opinion that unclaimed property funds in all likelihood cannot be deposited with the State Treasurer for investment purposes under current law.
Sincerely,
LESLIE RUTLEDGE
Attorney General