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Delaware Makes a Case for Converting Audits to VDAs

Posted By Contribution from Carla McGlynn, 2017/18 UPPO president, Thursday, November 30, 2017

With Delaware’s Dec. 11, 2017, deadline for converting existing audits to state’s Voluntary Disclosure Agreement Program fast approaching, the Secretary of State’s Office recently held a webinar for eligible unclaimed property holders. Alison Iavarone, Delaware’s unclaimed property VDA administrator provided background on the VDA Program and addressed frequently asked questions about the conversion option.

 

The VDA conversion option originates from S.B. 13, legislation intended to shift the state’s unclaimed property compliance efforts away from audits, while promoting voluntary and continued compliance, according to Iavarone. Holders that received an examination notice before July 22, 2015, are eligible. Those that were under audit as Feb. 2, 2017, also have the option to choose a fast-track audit, administered by state’s Department of Finance.

 

Why Convert?

Iavarone suggested several reasons why eligible holders should consider converting their audits to VDAs:

  • The VDA Program is intended to be a more business-friendly method than an audit for holders to come into compliance.
  • The VDA Program is designed to be faster and less expensive than an audit.
  • The holder manages the VDA process and presents its findings to the state for validation. After completion, holders that meet future reporting obligations are protected from audit for historic liabilities for the property types and entities reviewed under the VDA.
  • The state waives interest and penalties for holders participating in the VDA Program.
  • Holders are not expected to begin their internal VDA review from scratch. They can use any review information gathered before converting to the VDA to ensure greater efficiency.
  • Work papers from the audit will not transfer to the Department of State as part of the conversion. The only shared information pertains to the scope of the audit – a summary of entities, property types and audit population periods.

Frequently Asked Questions

Iavarone addressed several key questions related to the state’s VDAs.

 

What is the look-back period?

The look-back period is 10 report years (15 transaction years) from the date the original examination notice was sent to the holder.

 

What is the scope of the VDA from a converted audit?

The scope, for most eligible holders, was determined by the auditor. At a minimum, holders are expected to use the same scope as the audit for the VDA. If they choose, holders may expand the scope.

 

How is the state handling bifurcated audits, covering securities and general ledger items?

Under Delaware law, only the general ledger portion of the audit may be converted to a VDA. Securities are not eligible.

 

What if a holder already settled part of an examination?

If holders have settled and closed portions of the audit before conversion, only the remaining entities and property types will be covered under the VDA.

 

What is the statute of limitations?

S.B. 13 includes a 10-year statute of limitations from when the reporting duty arose. It will not be applied retroactively, as the previous six-year statute of limitations applied before S.B. 13 was effective.

 

How is estimation applied?

The estimation process continues to use second-priority or gross estimation, as it has in the past.

 

What if a settlement cannot be reached?

The audit will refer back to the Department of Finance if a settlement cannot be reached for a particular property type or some other aspect of the VDA.

 

Who is managing the VDA process for Delaware?

Drinker Biddle continues to manage the VDA Program on behalf of the Delaware VDA administrator, who ultimately has final review and approval responsibilities. 

 

Eligible holders must file Form NOI CONV with the Department of State by Dec. 11, 2017, to participate. For more information, visit http://vda.delaware.gov

Tags:  audits  Delaware  VDAs 

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