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Understanding Delaware’s Verified Report Request and Compliance Review Process

Posted By Administration, Thursday, November 21, 2019

As part of the sweeping changes to Delaware’s unclaimed property law resulting from the passage of S.B. 13, the state created a new verified report and compliance review process. This process is intended to give both the state and holders the ability to review and correct any errors or oversights in annual filings without escalation to examination.

 

Unlike full-fledged unclaimed property examinations, the verified report and compliance review process does not require an invitation to participate in the voluntary disclosure program to proceed. 

 

“With the verified report and compliance review process, we are looking at holders who are already filing or who have filed reports in the past, reviewing their most recent report, making sure it’s accurate and giving them a chance to remedy any errors,” said Delaware State Escheator Brenda Mayrack. 

 

Verified Report Request

Delaware primarily sends verified report requests to holders who previously filed unclaimed property reports but did not do so in the most recent year, or holders who had a significant variance compared to previous filings. Variances may include property types dropping off or reappearing, significant changes in the amount reported, or noteworthy differences compared to other holders in the same industry. 

 

Holders receiving a verified report requests are asked to provide a copy of their unclaimed property policies and procedures and given the option to certify that the report was correct and complete, under penalty of perjury, or to identify and report/remit additional property and correct errors. 

 

“Because many [holders receiving a verified report request] are nonfilers, we want to know the determination that no liability was due to Delaware came after a deliberate process that was informed by robust policies and procedures,” Mayrack said. “Particularly for holders that have gone through a VDA or exam, it’s important for us to know they have implemented appropriate and robust policies and procedures for unclaimed property going forward.”

 

Compliance Review

Holders who fail to provide a sufficient response to Delaware’s verified report request, or who filed a negative or $0 report, may receive a compliance review request. 

 

“The verified report is not a prerequisite to a compliance review, but the compliance review does serve as the first step in escalation if there is a nonresponse or insufficient response to the verified report request,” Mayrack said.

 

Like the verified report request, a compliance review looks at variances compare to previous filings and compared to holders in the same industry. The compliance review also is not a prerequisite to a voluntary disclosure program invitation and subsequent exam notice.

 

Compliance reviews are a more abbreviated review of filings than unclaimed property examinations. Like verified report requests, they provide holders an opportunity to correct errors. Holders are given one year to complete the review, so the state expects a prompt response to compliance review notices.  

 

“The state is not going to have much patience for a nonresponse,” Mayrack said. “We do send follow-up reminders, but if we don’t seem to be getting the holder’s attention, it will be escalated.”

 

Compliance reviews include a more thorough request for documents supporting the most holder’s most recent unclaimed property filing than the verified report request. Information and document requests may include:

  • Supporting federal tax returns, financial statements, chart of accounts, trial balances.
  • Holder’s affiliated and related legal entities information.
  • General ledger reconciliations, check registers, voided check lists, aging/credit reports, etc., supporting Delaware annual report.
  • Third-party administrator information (if applicable) for securities, payroll, stored value cards, rebates, etc.
  • Proof of owner outreach (due diligence) efforts performed.
  • Unclaimed property policies and procedures.

If there is a finding of deficiency in the compliance review, the state can either collect and enforce that deficiency or, if the findings suggest a potentially larger compliance issue, refer the holder for a voluntary disclosure program invitation and subsequent exam (if the holder declines VDA participation).  

 

“If you receive a letter under this program, respond promptly,” Mayrack said. “A nonresponse is the quickest way to be escalated for additional enforcement measures, which means an invitation to the VDA program and, subsequent examination notice if the holder does not opt into the VDA program.”

Tags:  compliance  compliance review  Delaware  unclaimed property  verified report request 

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