If any of your company’s operating entities are incorporated in the state of Delaware and you have never filed annual unclaimed property reports, filing a Voluntary Disclosure Agreement (VDA) with the state of Delaware is a better alternative, compared to being subjected to the dreaded audit. However, while other state’s programs range from informal to semi-formal, a VDA with the state of Delaware can take all of two years to complete. No stone is left unturned as any potential liability found within your company must be scrutinized. One comparison we like to tell our clients is that in a court of law, you are innocent until proven guilty. As an unclaimed property holder, you are guilty until proven innocent. Meaning, any stale-dated liability open for at least 90 days is deemed unclaimed property by Delaware unless it can be proven otherwise. With that in mind, be prepared to provide hundreds of pages of supporting documentation to lower your assessment while facing an audit.
To that end, the first important step is determining not only the property types being reviewed, but also the years where there are complete and researchable records. This is called scoping and sets the tone for the rest of the VDA. The more years to review, the better, as it means less years of estimations payable to Delaware. Records necessary in a project such as this include bank reconciliations, A/R aging reports, bank statements, void check reports, annual trial balances, etc. Delaware’s VDA program calls for a 15-year lookback period (10 years plus 5 years dormancy). As part of the initial response to Delaware shortly after the VDA is signed, companies are expected to disclose the years being reviewed by property type.
Once that important step is completed, the project becomes a self-audit. While two years may seem like a long time to complete a VDA, the months go by fast. Given this, it is imperative that the review not be put on the back burner and ensure progress is being made. One recommendation is to appoint one person at the company in charge of ensuring that the project is moving at an acceptable pace. It is also in your best interest to consider hiring outside consultants and/or attorneys as holder advocates. Unclaimed Property is a very niche industry – it would be wise to bring in people with the experience who have not only assisted in the completion of VDAs but have previously negotiated settlements with the State.
Now that you have the tools to get started, it’s time to dig into the detail. Best of luck!
To learn more about how Clearview Group’s Unclaimed Property team can assist your organization, contact: email@example.com.