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Unclaimed Property Focus
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UNCLAIMED PROPERTY FOCUS is a blog written by and for UPPO members, featuring diverse perspectives and insights from unclaimed property practitioners across the U.S. and Canada. We welcome your submissions to Unclaimed Property Focus. Please contact Tim Dressen via tim@uppo.org with any questions about submitting a blog post for consideration and refer to our editorial guidelines when writing your blog post. Disclaimer: Information and/or comments to this blog is not intended as a substitute for legal advice on compliance or reporting requirements.

 

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Evaluating and Completing a Voluntary Disclosure Agreement Program

Posted By Administration, Tuesday, July 12, 2016

In an effort to encourage companies to examine their unclaimed property practices and become compliant with applicable laws, several states offer holders the opportunity to enter into voluntary disclosure agreements (VDAs). By taking this step, a holder can follow a state’s guidelines and perform a self-audit, resolving noncompliance issues without the added pressure of a state-driven audit.

 

Although VDAs give holders more control than audits while achieving similar outcomes, they still require a significant commitment of time and resources. During a recent UPPO webinar, Ricardo Garcia, director of unclaimed property for BDO USA LLP, provided insight into the VDA process and considerations for participating.

 

Considerations

A voluntary disclosure program is a thorough process and review. Successful completion requires a holder to follow specific guidelines and steps outlined by the state. Before entering into a VDA, a holder should review the state’s VDA documentation, understand what the state expects to receive at the end of the process and evaluate whether meeting those expectations is realistic.  

 

“Often when a company enters into a voluntary disclosure process—at least the ones that fail—they neglect to understand the expectation of what the deliverable was,” Garcia says. “In those instances, it becomes very difficult and, in some cases, impossible to come to a settlement agreement with the state because certain procedures weren’t followed.”

 

Understanding how historical exposure will be calculated is essential before signing up. The process requires a review of available records to determine amounts by state. A holder needs to consider whether necessary records are readily available. When they aren’t, estimation may be necessary for some states.

 

Because multiple departments participate in the VDA process, evaluating the availability of key personnel is important as well. Can accounts payable, legal, and treasury commit necessary time to the process in addition to their day-to-day responsibilities?

 

Holders considering entering into a VDA also should determine whether they qualify. Although qualifications vary by state, participants typically cannot already be under audit. In some states, holders can’t file a VDA if they have done so previously.

 

Once a holder determines it is willing and able to proceed, notifying the state of the intent to enter into a VDA officially kicks of the process. This usually requires filing a simple form that includes the company’s name, allowing the state to verify the company is not already under audit.

 

Conducting the self-audit

After signing up, work on the voluntary disclosure officially begins. The process length varies by company, but most fall within the six- to 24-month range, according to Garcia. If a company has all records easily available and dedicates all available resources, it may happen quicker. Likewise, if records are decentralized and difficult to compile, and available personnel time is minimal, the process may exceed two years.

 

Early in the process, management will likely be anxious to know what the company’s exposure is. Set expectations so they understand that data must be gathered and compiled before developing an estimate of liability.

 

Begin by establishing the legal entities, property types, years and accounts to be reviewed.

 

“Initial scoping should be documented clearly,” Garcia says. “It’s one of the key items in a voluntary disclosure, allowing you to answer the question from the state, ‘How do you know you didn’t miss something.’ If you properly document your scoping and follow the guidelines and procedures expected by the state, scoping will set the standard for the rest of the review.”

 

Next, gather necessary source records to develop populations of potentially reportable transactions in accordance with state requirements. Source records may include:

        Bank records and outstanding check listings

        Void check listings

        A/R aging reports

        GL detail for write-off accounts

        Detail of transactions in unclaimed property liability account

        Trial balances

        Chart of accounts

        Organizational charts

        Tax returns

        State apportionment work papers

        Employee benefit information

After scoping and gathering records, compile a list of potentially reportable transactions. Make sure the list is complete. Document the approach used to arrive at population of potentially reportable transactions with two considerations in mind: Is it complete and is it researchable? Can the population be reconciled back to the accounting books and records? Does the population include all transactions required under VDA guidelines? Can the holder research the transactions included in the population to determine whether the amounts represent unclaimed property? If the answer is no, consider adjusting your review period, which may require additional estimation years.

 

“Ask yourself whether you can trace back the population to the source records,” Garcia says. “If you select a voided check, for example, can you prove why it was voided? If you cannot because of lack of records or record retention policies, then that period is not complete and researchable.”

 

Wrapping up the process

After completing these steps, quantify the exposure due to the state in which you filed the VDA. In some states, holders present their findings to the VDA administrator in person. In others, they submit a report via email or another method specified by the administrator. Once findings have been presented and an agreement has been reached between the holder and the VDA administrator, execute closing agreements and make the payment.

 

When the VDA process is complete, establish and implement procedures for ongoing compliance with unclaimed property laws.

 

“After completing the VDA, you’re at the best time to put new processes in place,” Garcia says. “You’ve learned so much in the process, and even though at that point you may be fatigued, it is the best time to implement procedures to ensure you don’t have to go through the voluntary disclosure process again in the future.”

 

Tags:  compliance  unclaimed property  VDA  voluntary disclosure 

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UPPO to Attend the ULC Annual Meeting this Weekend

Posted By Administration, Thursday, July 7, 2016

The Uniform Law Commission (ULC) is hosting its Annual Meeting, July 8 – 14 in Stowe, Vt. and the Uniform Unclaimed Property Act (UUPA) is anticipated to be reviewed and approved during the meeting. UPPO is sending two representatives, Kendall Houghton, co-chair of Government Relations & Advocacy Committee and Debbie Zumoff, co-chair of the UPPO ULC work group, to attend the meeting to listen to dialogue and discuss UPPO’s priority issues with commissioners.

 

On Friday, July 1, UPPO submitted its latest submission to the ULC which provided a list of issues UPPO believes needs additional consideration by the Committee to Revise the Uniform Unclaimed Property Act (Drafting Committee). Below is a glance at some of the issues and arguments presented in the submission. Read the complete submission.

 

Definitions
Definition of holder
Section 102(12)

The definition of holder should be clear and articulate that there can be only one holder of any item of unclaimed property. UPPO recommends the definition of holder be changed to the following: “’Holder’ means a  the person primarily obligated to hold for the account of, or to deliver or pay to, the owner property that is subject to this [act].”

 

Definition of security
Section 102(27)

The definition of security has been hotly debated during the Drafting Committee meetings by securities industry stakeholders, NAUPA, and UPPO. UPPO continues the push to achieve a fair and clear definition, and proposes that the definition of security be amended to: “’Security’ means a security or security entitlement as defined in [cite to appropriate sections of Article 8 of the Uniform Commercial Code] and includes a customer security account held by a registered broker-dealer. 

 

Indication of interest
Indication of apparent owner interest in property – divided reinvestments and non-return of federal tax forms
Section 210(b)(5) & 210(b)(8) NEW

The current draft UUPA takes strides to include modern and practical forms of communication between owners and holders to be considered as indication of interest. UPPO encourages the Drafting Committee to go further and include: automatic deposits, automatic reinvestments of dividends or interest, and the non-return of federal tax forms as indications of owner interest, as well.  Adding these types of owner interest is consistent with progressive legislation that was enacted by Louisiana in 2015 and is currently being considered by California.

 

Due diligence
Notice to Apparent Owner by Holder
Section 501(b)

The draft states that a holder is required to send the due diligence notice to owners who have consented to receive electronic communication by first-class United States mail and by electronic mail. UPPO seeks clarification that the requirement to send two communication pieces is the intention, further noting that requiring holders to contact the owner by one method is consistent with Section 503(b)(1) which grants the administrator the option to contact an owner by electronic mail or U.S. mail.

 

Audits
Complaint to Administrator about Conduct of Person Conducting Examination
Section 1008(b)

To ensure there’s enough time to prepare but not too much to unnecessarily extend the process, UPPO requests that a time frame between when a holder requests a conference with an administrator regarding an examination be changed to: “…the administrator shall hold the conference within a reasonable time 30 days after receiving the request.”


If you want to learn more about the ULC Annual Meeting and what was discussed, stay tuned for a follow-up blog post and register for the free, members-only webinar Revising the Uniform Unclaimed Property Act: Where do we go from here?, Monday, July 25; noon – 1 p.m. EDT.

 

More information
We’re halfway through the ULC’s effort to revise the UUPA

Tags:  advocacy  Annual Meeting  unclaimed property  Uniform Law Commission 

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Certificate program provides unique opportunities for education and development

Posted By Administration, Wednesday, June 29, 2016

Since its inception, the Unclaimed Property Professionals Organization (UPPO) has made training one of its cornerstones. To give members a well-defined path to gain a well-rounded education in unclaimed property and to demonstrate their professionalism and knowledge, UPPO introduced the Unclaimed Property Certificate Program last year.

 

The inaugural group of 30 participants recently completed the program. The level of education provided as part of the certificate program surprised and impressed several of the first-year participants.

 

“It really showed me what I did and didn’t know,” says Shaunna Glogoza, accounts payable lead and unclaimed property clerk for Landauer, who has worked in unclaimed property for four years. “It’s easy to take for granted some of the fundamentals and think you know it all. I was expecting to simply refresh my existing knowledge and earn the certificate. I wasn’t expecting to get as much out of it as I did.”

 

Achieving the certificate requires completion of a series of live and on-demand webinars and UPPO Annual Conference sessions, along with a passing grade on quizzes following each education session. Topics include due diligence, dormancy, record retention, non-compliance liability, and timely remitting and reporting. See the full curriculum.

 

One of the many benefits of the program is the inclusion of all aspects of unclaimed property. Because practices and requirements vary by state, property type and industry, even people who have been handling unclaimed property for several years may not understand the nuances that don’t apply to their day-to-day responsibilities.

 

“Having worked in all areas of unclaimed property for about five years, I went into the program thinking it would be really easy,” says Jessica Rogers, unclaimed property administrator at Lincoln Financial Group. “But it put me in my place. The value far exceeded my expectations. I definitely learned a lot.”

 

In addition to the knowledge gained through participation in the program, achieving a certificate demonstrates a commitment to professionalism. It can build self-confidence of certificate recipients and the confidence of others.

 

“People have more trust in you if you’ve been through a formal educational program like this,” says Jason Higginbotham, CAPM, manager at Crowe Horwath LLP. “As a holder advocate, it helps me differentiate myself to be able to say I’ve been through the UPPO certificate program.”

 

The inaugural year certificate program participants are excited not only to have been part of the first group to achieve certificates, but also at the possibility for expansion of the program. Ideas include offering certificates for multiple tiers—beginner, intermediate and advanced. In fact, Higginbotham, who serves on the Certificate Program Subcommittee, says these are among the program’s long-term goals.

 

With registration opening on July 12 for a new class of participants, now is the time to consider whether it’s worth pursuing a certificate. Those who have been through it respond to this question with a resounding, “yes.”

 

“It’s absolutely worth it,” Glogoza says. “The amount you will learn can easily be applied to what you do every day. It’s one of those, ‘You don’t know what you don’t know until you find out’ things. Even people who have been in unclaimed property for several years can learn from it, so it’s definitely worth it.”

 

Higginbotham concurs. “There’s no other program out there for unclaimed property professionals that compares to this one,” he says. “If you work for a holder, this is the perfect way to get a broad introduction to unclaimed property and the only end-to-end overview of everything you need to know. If you’re a holder advocate, this is a good way to demonstrate to clients that you not only have the experience but also the education to represent them effectively.”

 

Learn more about the UPPO Unclaimed Property Certificate Program and watch for registration to open for the 2016/17 certificate program on July 12 a noon CDT/1 p.m. EDT. It will be limited to 65 members.

 

Tags:  certificate program  education  professional development  training  unclaimed property 

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Litigation update: Pennsylvania files complaint and seeks ruling that “official checks” are treated like money orders in suit against Delaware and MoneyGram, Part 2

Posted By Contribution from Sam Schaunaman, J.D. and GRAC member, Friday, June 24, 2016

Treasury Department of the Commonwealth and Treasurer Timothy Reese, Plaintiffs v. Delaware State Escheator David Gregor and MoneyGram Payment Systems Inc., Defendants (U.S. District Court for Middle District of Pennsylvania)

 

Part 1 of this article provides background on lawsuit filed by the state of Pennsylvania against MoneyGram Payment Systems Inc. (MoneyGram), and the state of Delaware, as well as a separate suit filed against the same defendants by the state of Wisconsin.

 

MoneyGram’s Motion to Dismiss

Defendant MoneyGram filed a Motion to Dismiss the lawsuit brought by Pennsylvania. In an April 25, 2016 brief supporting its motion, the company explained how the dispute arose and why it believes the lawsuit lacks merit to proceed.

 

According to allegations made in MoneyGram’s Motion to Dismiss, the dispute began in 2014 when Arkansas demanded the company pay substantial sums to that state for uncashed official checks that had already been escheated to Delaware. MoneyGram declined and encouraged Arkansas to resolve the matter with Delaware. Arkansas refused, informing MoneyGram that the state intended to audit the company and “request that every state join” the audit, unless the state’s demands were met. As a result, approximately 20 states have made similar demands of MoneyGram.

 

MoneyGram’s brief raises numerous issues, two of which are especially noteworthy:

  • The company alleges that the District Court does not have subject matter jurisdiction. It cites 28 U.S. Code sec. 1251(a), which says, in part, that the U.S. Supreme Court “…shall have original and exclusive jurisdiction of all controversies between two or more states.”
  • The company also alleges that the plaintiffs’ claims violate MoneyGram’s constitutional due process rights. It cites the U.S. Supreme Court case of Western Union Telegraph Co. v. Pennsylvania, and claims that requiring MoneyGram (as opposed to Delaware) to pay Pennsylvania for property already escheated to another state would improperly result in the company paying a single debt more than once, taking its property without due process of law. MoneyGram notes that the Supreme Court in the Western Union case stated, “Our Constitution has wisely provided a way in which controversies between states can be settled without subjecting individuals and companies affected by those controversies to a deprivation of their right to due process of law. Article III, Section 2 of the Constitution gives this court original jurisdiction of cases in which a State is a party.”

Delaware’s Motion to Dismiss

Defendant David Gregor, Delaware state escheator, also filed a Motion to Dismiss. In an April 20, 2016 brief in support of the motion, it is stated that the case should be dismissed because it essentially is a disagreement between two states, Pennsylvania and Delaware. Therefore, under 28 U.S. Code sec. 1251(a) and other authorities cited, it is argued that the U.S. Supreme Court has original and exclusive jurisdiction over the dispute.   

 

Supreme Court motions

Despite the disagreement between states, it appears there is one thing on which they agree. They all contend that the U.S Supreme Court (Supreme Court) is the appropriate venue for the dispute. In recent weeks, there have been multiple motions to the U.S. Supreme Court related to the MoneyGram disputes:

  • On May 26, 2016, Delaware filed a motion, asking the Supreme Court to hear its dispute against Pennsylvania and Wisconsin.
  • On June 3, 2016, Wisconsin filed a motion, making a request to the Supreme Court, seeking leave to file a counterclaim against Delaware.
  • On June 9, 2016, 21 states filed a motion, asking the court to hear their dispute against Delaware. The states note that hundreds of millions of dollars are at stake.  For example, they state that between May 2011 and March 2015, at least $162 million in unclaimed funds attributable to MoneyGram official checks went uncashed or were not redeemed. They are asking the court, among other things, to: (i) declare that funds payable on unclaimed MoneyGram official checks sold in their states should be remitted to them, rather than Delaware, (ii) instruct Delaware to turn over funds for unclaimed official checks that have already escheated by MoneyGram, and (iii) award damages, including interest.
  • On June 13, 2016, Pennsylvania filed a motion with the Supreme Court, stating that it concurs in Delaware’s Motion for Leave to file Bill of Complaint, and asking the Supreme Court to grant Delaware’s motion.

The U.S. Supreme Court will review the motions and decide whether to hear the cases or decline. UPPO will continue to monitor and report on developments surrounding these cases as they occur.

 

About the contributor

Sam Schaunaman, senior manager at Ryan AUP and member of the UPPO Government Relations and Advocacy Committee, contributes to UPPO’s monthly litigation update blog posts. Schaunaman has over 26 years of unclaimed property experience in all aspects of unclaimed property and is a frequent author of unclaimed property articles and whitepapers. Schaunaman is a member of the Oklahoma Bar Association and American Bar Association.    

 

Disclaimer: This case summary contains a general description of the case, and neither UPPO nor Ryan, or any of their affiliated or related entities, by means of this summary, is rendering business, financial, legal, tax, reporting or compliance or other professional advice or services.  This summary blog is not a substitute for such professional advice.

Tags:  Delaware  litigation  money orders  MoneyGram  official checks  Pennsylvania  unclaimed property 

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Unclaimed property in the credit department

Posted By Administration, Thursday, June 16, 2016

Within a company’s credit department, customer accounts are often sources of potential unclaimed property obligations. They typically take the form of credits—positive account balances representing the value of money, products or services owed to customers. Because customer accounts are complex and fluid, identifying potential unclaimed property exposure lurking in multiple general ledger accounts can be challenging.

 

Heela Popal, 2016/17 UPPO president and director of state and local tax with PricewaterhouseCoopers, and Troy Wangen, 2016/17 UPPO Midwest Region vice president and senior manager with True Partners Consulting, offered insight into common sources of unclaimed property liability in credit departments during a two-part session at the National Association of Credit Management’s 120th Credit Congress & Expo on Wednesday, June 15.

 

Trade AR

Several factors can lead to unclaimed property obligations appearing in a credit department’s accounts receivable. They include:

  • Discounts: If a company offers discounts for paying promptly or purchasing in volume, some customers may unwittingly pay the full rate, leading to a credit.
  • Price fluctuations: Some customers pay based on their purchase order rather than the supplier’s invoice. If a price changed after issuing the purchase order, an overpayment and subsequent credit may result.
  • Product returns: A company may credit customer accounts for product returns rather than immediately issuing a refund.
  • Overpayments: Whether due to one the previously mentioned discounts and price fluctuations or simple clerical errors, incorrect payment amounts are common.
  • Pre-payments: When customers pay in advance for products or services, those positive balances represent obligations for the company that may eventually turn into unclaimed property liabilities.
  • Accounting errors: Simple mistakes may cause a positive customer balance and eventual unclaimed property. For example, a payment may be applied to the wrong account or a credit may be applied inadvertently.

 

Cash application/tolerance write-offs

Companies often define a balance threshold, below which AR credits are automatically written off. However, state unclaimed property laws generally don’t offer exemptions for small balances. Even a one-cent credit can be considered reportable unclaimed property. Some states have low thresholds for due diligence. Connecticut, for example, requires companies to send due diligence letters for any amount, no matter how small.

 

Unapplied cash/suspense accounts

When a company collects customer payments via a lockbox, payments don’t always include an account number, invoice number or other identifying information. Such payments may be moved to a specific trade AR customer account or separate suspense account until it can be researched and properly matched. If the payment cannot be matched, it creates an unclaimed property liability if it remains on the books as an unreconciled credit balance.

 

Unclaimed property processes

Upon establishing that the credit department has potential unclaimed property liabilities, developing processes for properly dealing with them is essential. Because unclaimed property is a company-wide issue, determine whether any procedures currently exist. If so, begin working on a plan to coordinate efforts between departments. If not, identify which departments (accounts payable, human resources, sales, customer service, for example), subsidiaries and entities need to be involved.

 

Establish an escheat coordinator to communicate with all departments that have unclaimed property and clearly define roles and responsibilities within each department. Document the process in a flow chart, including applicable general ledger coding for entries. Develop a compliance timeline or calendar, a due diligence letter process and a method for tracking changes to state reporting requirements.

 

As this company-wide process takes shape, develop policies specific to the credit department as well. Plan a quarterly or semi-annual review of trade AR credit balances and determine how liabilities will be researched. Move tolerance write-off balances directly to a clearing account for netting purposes or credit directly to an unclaimed property liability account. For unapplied cash, move unresolved amounts to the unclaimed property liability account.

 

Tackling unclaimed property issues is a major undertaking, but the consequences of noncompliance are enormous. Identifying sources of unclaimed property liability within the credit department and establishing policies and procedures for dealing with them helps ensure on-going compliance and reduces risk.

Tags:  compliance  credit department  unclaimed property 

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