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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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Surviving an Unclaimed Property Audit

Posted By Administration, Sunday, March 10, 2013
Updated: Friday, March 8, 2013

The term "audit” can strike fear into the hearts of most people. Whether it’s an IRS audit of your personal taxes, a wage and hour audit of your company or – in our world of unclaimed property – an unclaimed property audit, the process can be intimidating. However, there are a number of things you can do to survive an unclaimed property audit.

Unclaimed property audits can be performed by internal state unclaimed property auditors or by an external third-party audit firm contracted by the state. Regardless, the expectations for the holder (your company) are the same:

Expectations of the Auditor for the Holder

  • Holder will pay attention and be responsive to the audit
  • Respond to the audit letter
  • Schedule an opening conference with the auditor
  • Dedicate personnel to comply with audit requests
  • Comply with timelines.(Note: penalties can be applied if you’re not cooperating)
  • Open and regular communication

Expectations of the Holder for the Auditor

  • Written work plans including the methodology/process to be used
  • Formal written formal requests for records and documents
  • Confidentiality agreements between the holder, auditor and state(s)
  • Timely response to questions

Surviving an unclaimed property depends greatly on preparedness. The following is a list of some preventative measures you can take to prepare for a possible unclaimed property audit:

  • Keep good accounting records
  • Maintain and follow good policies and procedures
  • Keep up with the unclaimed property laws, regulations and requirements in the state(s) where your company does business
  • Understand unclaimed property types and which types your company has
  • Keep good records pertaining to the due diligence processes being followed
  • Report unclaimed property to the state(s) regularly and as required
  • If you find you have not been in compliance with a state, consider any VDA programs the state(s) may have available
  • Ask for assistance! This can be accomplished by contacting state administrators or by contracting with a third-party service provider to assist with unclaimed property compliance.
  • If your company receives an audit letter, be responsive. There may be penalties if you ignore it.

Some of the items listed above are perhaps "common sense,” but unfortunately companies are often not prepared or fail to follow their own policies and procedures. For example, a record retention policy may require seven years, but upon review documents are being destroyed before the seven-year point or are retained for longer than required.

Documentation of the due diligence process is also a key factor and one that can be difficult for holders to manage. For that reason, you may want to consider using a third-party service provider to assist with the due diligence process. Please refer to previous posts on third party due diligence providers and software options to assist unclaimed property professionals.

Finally, understand the possible defenses to unclaimed property audit findings:

  1. The property wasn’t actually owed. This is a good example of why good accounting records are necessary.
  2. The property wasn’t subject to the Unclaimed Property Act
  3. The property was already reported

Unclaimed property compliance is an incredibly complex and constantly changing area. As we’ve all heard before, "a good offense is the best defense.” Being proactive, learning and maintaining your knowledge about unclaimed property and creating good policies and procedures are key measures to ensure you have confidence going into an audit. Being a member of UPPO can help you to gain that confidence through education, state-specific legislative alerts through govWATCH and the UPPO Forums.

ADDITIONAL RESOURCES

UPPO Webinar: Third Party Audits: What Holders Should Know From an Auditor & State Administrator’s Perspective
UPPO Annual Conference
: Please refer to the Agenda for a list of sessions concerning audits.

UPPO LinkedIn Group

UPPO on Twitter


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  Audits  Compliance  Due Diligence  education  UP101 

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UP 101: What IS Unclaimed Property?

Posted By Administration, Monday, March 4, 2013

Professionals enter the world of unclaimed property from several areas: accounting, legal, payroll, and more. No matter what your background, now that you’re working with unclaimed property for your organization, it’s vital to understand the key aspects of unclaimed property compliance and reporting.

In this series of Unclaimed Property 101 blog posts, we’ll walk through the basics of unclaimed property, starting with a look at what unclaimed property is exactly. Whether you’re new to unclaimed property or simply need a refresher course, this series is for you!

What is unclaimed property?

Understanding what unclaimed property is should be the basis for your work going forward. The most basic definition is:

Intangible personal property that has gone unclaimed by the rightful owner (i.e., remained outstanding) for a specified period of time.

To drill down a little further, let’s look at the requirements for defining what constitutes unclaimed property (also known as escheatable property). Property is considered unclaimed or abandoned if it meets all of the following three requirements:

  • It is held or issued in the ordinary course of the holder’s business;
  • It constitutes a debt/obligation of the holder to a creditor/owner, and;
  • It remains unclaimed for more than the statutory dormancy period. The dormancy period is determined by property type and by each state. One thing that may surprise you is that states do not want you to turn over unclaimed property early; they want you to hold onto it for the full dormancy period to give owners the full amount of time available to find it.

If the property in question does not meet all three requirements, you may not necessarily have to report it. As usual, we recommend that you work closely with your company’s legal counsel if there are any discrepancies or grey areas.

Another way of looking at it is through the lens of "when is property not abandoned?” Property is not abandoned when:

  • The owner has increased or decreased the amount in the account.
  • There has been owner-initiated written communication with the holder.
  • The owner has indicated an interest in the property, as evidenced by memo/record in file (such as a telephone conversation record).
  • The owner has another relationship where there has been owner-generated activity (e.g., another active account).

Those are the basics of defining unclaimed property. However, there are a few more important things to keep in mind:

  • While most of the items you’ll encounter in unclaimed property are intangibles, such as customer credits or checks that haven’t been cashed, there are exceptions to the "intangible” rule. Namely, most states claim contents of safe deposit boxes or items with fair market value.
  • Also, all states have unclaimed property laws. Unfortunately, no two state laws are the same. That means you need to stay up to date on your state’s law and any changes to it. If you’re a member of UPPO you can sign up for free govWATCH emails that automatically alert you to changes in state law.

If you’re interested in learning more about the basics of unclaimed property, stay tuned to the blog for more in the Unclaimed Property 101 series. You can also view a free webinar on the topic and explore our glossary of unclaimed property terms.

ADDITIONAL RESOURCES
Unclaimed Property 101 Webinar
(FREE)

Previous UP 1010 Post - History of UP


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  education  FAQs  UP101 

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Analyzing Technology Solutions for Unclaimed Property Compliance

Posted By Administration, Sunday, February 24, 2013
Updated: Friday, February 22, 2013

Several weeks ago, we discussed the due diligence involved in assessing whether to outsource the management of the unclaimed property process. Outsourcing is certainly an option for handling all of the complexities yourself, but there are other alternatives, including implementing software solutions to help with the due diligence and reporting process. Technology solutions can help you gain efficiencies, reduce expenses such as overtime and provide compliance with reporting to the various states and jurisdictions.

There are a number of software service providers, many of them members of UPPO that offer technology solutions for your operation.

What are the BENEFITS of using a software package?

  • Many holders attempt to maintain complex matrices with the requirements for every state and jurisdiction. With ever-changing legislative and legal requirements, this task can be never-ending and difficult to maintain. Software systems are designed to comply with these requirements and as a result, software providers bear the burden of keeping abreast of changes.
  • Because your company may do business in multiple states and/or jurisdictions, software systems can help ensure you’re reporting the correct property to the correct state(s).
  • Many systems can quickly provide information to you regarding due diligence requirements. For example, if you need to know about the dormancy period in a specific state, a software solution should be able to provide that information.
  • Some software systems store property owner records in a central repository, rather than in multiple spreadsheets or other types of manual storage.
  • Software systems can aid in developing, refining and maintaining unclaimed property best practices.
  • Systems may be able to track previously reported property and reduce or even eliminate double reporting.
  • Technology solutions can aid you in providing compliance reports to upper management as well as forecasting for potential future unclaimed property liability.
  • Staying in contact with your customers and clients is important to reduce potential UP liability. Software systems can assist you with proactive contact and research.
  • Software systems can help reduce costly reporting errors, taking advantage of allowable exceptions such as B2B or Payroll, and offering available alternatives/requirements for due diligence contact requirements.
  • Perhaps one of the greatest advantages of utilizing a software system is the audit trail it can provide for your time sensitive activities, along with any changes to a record. This may prove invaluable if your organization becomes the subject of an unclaimed property audit.

What are some CHALLENGES with using a software package?

  • As we discussed in our previous third party outsourcing post, use of a specific product or service can be a matter of cost. It is important to determine the return on investment for your organization.
  • Depending on whether the software you choose is Web-based or a traditional licensed package housed on your internal architecture, available IT resources may be an issue, especially for smaller companies.
  • It is important to remember that software systems are not kitchen appliances! You rarely just "plug them in and they work.” Training and implementation efforts require time and resources to achieve the greatest results.
  • Technology will only be as good as your process. Remember the saying, "garbage in, garbage out?” Automating a bad process will only aid in making mistakes faster.

Here are few things to consider if you’re looking for a technology solution.

  • How do they track legislative, regulatory and legal activity? How quickly do they update their systems to reflect any changes? How often do they provide software upgrades and/or enhancements? Will they do any customization of the system, if required for your business model? If yes, at what cost?
  • What type of indemnification do they provide to you?
  • If there are any types of errors in the due diligence or reporting process, will they pay any penalties?
  • What platform options are available? Browser/hosted, traditional licensed software on your system or other.
  • If you are considering a hosted service, what is the guaranteed "uptime?” What redundancy systems do they have in place to reduce any downtime?
  • What support is offered and what are the hours for support?
  • Is support provided free or at an additional cost?
  • What type of installation and training resources do they provide?
  • What type of reporting and audit information does the system provide?
  • How does the product house and track data for multiple companies that have different states of incorporation?
  • Can you design your own search letters or use provided templates so your company can exceed due diligence requirements and find the rightful owners? Can you create a single letter for an owner with multiple properties?
  • Does your solution provide options for creating notices other than the typical due diligence (i.e., courtesy correspondence prior to the required correspondence, NY advertising, certified letters)?
  • How does the system identify what action was taken on each record? For example, is there a way to tell if the record was escheated to the State, paid to the owner, voided or any other action?
  • With some states requiring reports to be encrypted, does the system use encryption?
  • What types of industry holders does your solution support? (banking, corporation, oil and gas, life insurance, securities, etc.) Does it contain the differing report due dates based on those classifications?
  • Does the solution house any Canadian information?
  • What type of security processes and systems do they have in place to protect your sensitive data?
  • What types of options are available to assist you in setting access controls and security levels?
  • As with any service, it is important to check references, both current and past clients. Be sure there are at least two or three from your industry.

As an unclaimed property professional, staying abreast of the complex requirements and reporting properly is perhaps the most important part of your job. Software systems that automate the process can provide a huge benefit to you and your company, as they can provide peace of mind and confidence that you are employing best practices to enhance your due diligence and reporting compliance procedures.

A number of services providers that assist with unclaimed property due diligence will be exhibiting at UPPO’s 2013 Annual Conference in San Diego, March 24-27. If you haven’t registered for the conference yet, it isn’t too late. If you are registered, be sure to check out the exhibits while you’re there and see for yourself whether a software solution is right for your organization.

ADDITIONAL RESOURCES
Suggested Google Search Terms to Find 3rd Party Due Diligence Providers:

  • Unclaimed Property Software Systems
  • Unclaimed Property Due Diligence Services
  • Escheatment Software


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  Due Diligence  education  Members  Service Providers 

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Guest Post: DE Secretary of State Bullock - VDA Program

Posted By Administration, Sunday, February 17, 2013
Updated: Saturday, February 16, 2013

Delaware’s New Voluntary Disclosure Program

By the Honorable Jeffrey W. Bullock, Delaware’s Secretary of State


Editor’s note: Secretary of State Bullock wrote this post as a guest author to help explain his state’s new VDA process to UPPO members. His office is the driving force behind Delaware’s new VDA process, which we featured in an earlier legislative update. Sec. Bullock will be part of our govSPEAK panel at the 2013 UPPO Annual Conference, where he will answer specific questions about Delaware’s new VDA program, as well as provide an update regarding the Delaware VDA program register online to secure your spot at the conference.

As the state that nearly a million business entities call home, Delaware values each and every company domiciled in the First State. Delaware is a state where companies want to do business because ours is a state with a reputation for clarity and fairness.

It was with that in mind that, on July 11, 2012, Governor Jack Markell signed into law Senate Bill 258, which created a new abandoned and unclaimed property voluntary disclosure program (the "VDA Program”) in Delaware. The new unclaimed property voluntary compliance program is administered through my department, the Delaware Department of State, and offers Delaware-registered business entities an opportunity to come into compliance with Delaware’s unclaimed property laws. The new VDA Program is intended to build on Delaware’s business reputation and specifically the reputation of the Department of State in providing quality service to Delaware’s corporate clients by making abandoned and unclaimed property compliance for Delaware companies cheaper, faster and easier.

Because we have designed a business-friendly VDA process, I believe almost every Delaware-registered business entity, regardless of their reporting history, should take advantage of Delaware’s new VDA Program. Companies that have made recent acquisitions, or have not retained complete and researchable records for 10 years or more, can avoid an audit, interest and penalties, and significantly reduce potential liability, all at the same time, regardless of reporting history. Even companies who have a robust unclaimed property reporting history that believe they are in compliance with Delaware law will receive greater certainty by going through our new VDA process tailored to that company’s circumstances and getting a release of all historic unclaimed property liability.

Under the new program, companies that enroll by June 30, 2013, will only be responsible for reporting abandoned or unclaimed property dating back to 1996. That’s 15 years less than under a Delaware unclaimed property audit. Additionally, companies that choose to participate will not have to pay any interest or penalties on that property.

Most importantly, companies that successfully complete the new VDA Program receive a release of all past due unclaimed property liability up to the present. After entering and completing the VDA Program, companies that fulfill their future annual reporting requirements are protected against Delaware unclaimed property audits for all prior years up to the date of execution of the final VDA Program documents. All the state asks in return is that companies continue to fulfill their ongoing responsibility to report and remit annually their Delaware abandoned or unclaimed property.

Since Senate Bill 258 was enacted in July 2012, I have been speaking to chief financial officers and professionals who have previously represented companies in Delaware unclaimed property audits about ways we can improve Delaware’s process for voluntarily reporting unclaimed property. As a result of those conversations, we have designed a VDA process to fit the needs of each and every company that enrolls. From the introductory meeting through the execution of the final release agreement, our goal is no different than that of the companies I have spoken to, which is to get into compliance as soon as possible in a way that is reliable, efficient, cost-effective, and most importantly, fair.

The alternative to voluntarily participating in the new VDA Program, of course, is the possibility of an unclaimed property audit, in which the Delaware Division of Revenue ("Division”) can examine a company’s books and records for unclaimed property compliance dating back to at least 1986. Such unclaimed property audits often take several years to complete, and the Division has the right to assess interest and penalties of up to 100 percent of a company’s total liability. Accordingly, the potential exposure for a company under audit can be as much as twice the potential exposure as under the new VDA Program.

As the Delaware Secretary of State, I take seriously my responsibility to listen to the concerns of our corporate constituents. My goals remain very straightforward: to administer a VDA Program that brings your company into compliance as soon as possible in a way that is reliable, efficient and cost-effective and also fair to all participants. I believe that this program is a good deal for Delaware companies and one that can save Delaware-registered business entities time and money. As a result, I urge every Delaware company to go to our new website, www.DelawareVDA.com, to learn more about the program and take advantage of this new initiative.


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  Due Diligence  education  Policy  UP Laws 

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Advancing Growth and Change - 2013 UPPO Annual Conference

Posted By Administration, Sunday, February 10, 2013
Updated: Friday, February 8, 2013

The theme for the 2013 UPPO Annual Conference couldn’t be more appropriate for the unclaimed property profession. "Change” seems to be about the only constant that requires unclaimed property professionals to grow their knowledge and maintain compliance, in order to help protect a company’s bottom line.

The conference – which is being held in San Diego, March 24-27 – is three days of education and networking, as well as an opportunity to meet with service providers to the unclaimed property industry. The conference offers three tracks based upon the attendee’s expertise; basic, intermediate and advanced. This year there are also opportunities to hone "soft skills,” with sessions on public speaking, understanding others, being a better manager and building a broader professional network.

The event begins Sunday, March 24 at 2:00 p.m. with three "pre-conference” sessions; Unclaimed Property Boot Camp (basic), Getting Your Point Across: Public Speaking Methods and Technologies (all levels) and Pros and Cons of B2B (Intermediate/Advanced). Following these sessions, there will be a welcome reception and a UPPO Gives Back charity event to kick off the conference in rousing fashion.

The next two-and-a-half days will feature a full slate of educational topics that are listed in the conference agenda. Several of the "hot topics” will include the following:

· "Have I Got a Deal for You!” – Internet deals such as Groupon, Living Social and others pose new questions and implications. This session will discuss how these sites work and how the states view these types of transactions.

· "How Dodd Frank Impacts Unclaimed Property” – How does this Act, passed in 2010, impact your organization?

· "govSPEAK” Forum – A panel of state unclaimed property administrators will discuss activities for their various states and respond to your questions, while Delaware Secretary of State Jeffrey Bullock will highlight his state’s new VDA program.

· Speak "UP”: Looking into the future to predict the five most significant events that may impact unclaimed property.

New this year is the UPPO Scholarship Program 5K Fun Run/Walk on Monday, March 25 beginning at 5:45 p.m. All proceeds from this event will benefit the UPPO Scholarship Program.

We invite you register today and join hundreds of your colleagues in San Diego to get the latest information and education for unclaimed property professionals. If you have questions, please contact Jackie Cote or Ashley Hennig.

ADDITIONAL RESOURCES
Members as Mentors Webinar – January 2013 (members only)
UPPO Events


The analysis and opinions expressed herein are those of the authors and do not necessarily represent the views of the Unclaimed Property Professionals Organization or its officers, directors or members. This summary document provides background information and is not intended as a substitute for legal advice.

Tags:  education  Members  Service Providers 

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