Unrated players eligibility for under prizes

Correct.

The recommendation is that an organizer “should” design the tournament with unrateds not eligible for a prize such as U1500, but the organzer “can” ignore that recommendation and have a U1500 prize with zero-rated players (another way, somewhat shaky, of viewing unrated players) eligible for the prize.
Organizers doing so without announcing it run a risk of players complaining if an unrated is given a Uxyz prize (with the further risk that the rules committee might rule that the organizer gave the wrong awards and needs to give out the correct awards). Multi-section tournaments that allow unrateds in the class sections generally have pre-specified limitations on how much the unrateds can win in those sections and have thus satisfied that need for announcing it.

I generally prohibit adult unrateds from any really low sections that I organize. That takes care of prize limits.

Alex Relyea

Perhaps rather than promulgating your confusion to other members of your club, you could now explain to them what it means when taken in the context in which is it intended.

in small local tournaments three words for those who complain about such-- Get A Life

Rob Jones