KeepUP™ Blog

1/29/15 7:19 PM

How to Tame a Wild U.P. History

by Greg VerMulm

how-to-tame-a-wild-up-historyMany aspects of unclaimed property can seem out of control, requiring you to deal with issues such as irate owners who don’t understand you are returning money to them and aggressive third-party auditors intent on digging for every last dollar. We launched the “How to Tame a Wild…” content series to offer tips for taming these wild things and helping your company return to calmer unclaimed property processes. Today’s blog involves companies with “wild” unclaimed property reporting histories.

Because states in past years were less active in the enforcement of unclaimed property statutes than they are now, many holders find themselves in situations where past reporting within their organizations is intermittent or missing altogether. If you are one of these companies with a wild unclaimed property history, all is not lost. We’ve worked with hundreds of holders to overcome these issues, bring them into compliance and set them up with successful unclaimed property policies and processes.

State assistance to correct unclaimed property reporting defects

State administrators are aware many holders struggle with past unclaimed property issues, and they have provided assistance to help companies comply.

First and foremost, some states were and are willing to negotiate Voluntary Disclosure Agreements (VDAs), which allow holders to come into compliance without amassing huge penalties and interest. Even if you decide not to pursue a VDA, with the help of a professional unclaimed property advisor you might be able to negotiate with states for reduced assessments based on willingness to cooperate and other factors.

Records management as a path to compliance

Along with a failure to report properly, many holder organizations struggle to properly identify unclaimed property and document records for the purpose of both calculating and proving escheatment levels. One of the best ways to tame a wild unclaimed property history is to buckle down and create a records infrastructure that supports your unclaimed property efforts.

These are some of the issues you should be thinking about:

  • Do you have records management methods for automatically identifying unclaimed property within every department according to statutes of all applicable states? Unclaimed property is often produced inadvertently, and these missing properties are often used by auditors to justify high assessments.
  • Have you had a professional risk assessment of your records completed to determine the likelihood of an audit, as well as potential liabilities included in audit findings?
  • If you are facing high assessments, have you performed an exemption analysis to determine a just-right level of compliance? This means taking advantage of legal exemptions, just as you do with the tax return. It can reduce initial costs of coming into compliance.

The biggest risk of a wild unclaimed property history: audit

If you choose not to participate in a VDA or clean up your records infrastructure, you leave yourself at the mercy of your spotted records and reporting history in the event of an audit. There are things you can do after you’ve been notified of an audit to minimize the impact of your history. However, it’s always better to think about it before an audit notice arrives.

At any stage before during or after an audit, it’s advisable to assess your current situation, remediate any issues you can and begin to set up a more solid records and reporting system for the future.  Tangible efforts you make at any time to come into compliance and present clear records often can improve the audit experience.

Assuring an un-wild unclaimed property future

It’s very tempting, once you have come into compliance and are breathing a sigh of relief, to slip back into bad habits—especially if staff is the same as when compliance mistakes were made. Take steps to ensure any infrastructure changes will hold, no matter who is implementing unclaimed property reports.

Create a procedures manual especially for unclaimed property functions within your company. Even with the changing of the guard, the manual will help assure uniform processes that support your company’s unique goals. Within those procedures, be sure to include provisions for staff training, thorough identification of unclaimed property within every department, and efficient due diligence processes that aim to reduce the amount of abandoned property you must report in the first place.

Every unclaimed property holder is a bit different. Consider forming a task force to make sure you’re covering all bases to tame your wild unclaimed property history, and don’t forget to engage a professional unclaimed property advisor as needed.

Topics: Reporting