Unclaimed Property Invitations, Audit Notices, and Self-Audit Letters

December 1, 2020

States often send official communications to companies regarding unclaimed property. While some of these mailings are mere filing reminders, other types of communications, such as VDA invitations, audit letters, and self-audit letters, urge holders to take affirmative steps to comply or demonstrate compliance with the unclaimed property laws. We will discuss some, but not all of these types of communications, to assist companies in understanding what each one means, and what holders should consider upon receipt of such a communication.

Delaware – VDA Invitations and Audit Notices:

We recently posted that the Delaware Department of Finance is expected to send new unclaimed property audit notices in the near future to businesses who did not enroll in the state’s Voluntary Disclosure program (VDA program) in response to the Secretary of State’s invitation to participate in the program. Under Delaware law, businesses who do not enroll within the 90-day notice period in the letter will be referred to the Department of Finance for an unclaimed property audit.

Indiana, Pennsylvania, Utah and Washington: The Self-Audit Letter

Indiana, Pennsylvania, Utah and Washington have recently started mailing holders letters on official state letterhead that advise holders of their obligation to comply with the unclaimed property laws. Further, the letter proclaims that based on the state’s records, the holder “has never” or “only rarely” reported unclaimed property to the state.These letters seem to target smaller companies who may not be as aware of their unclaimed property reporting obligations and/or the self-audit processes. The letters specify that the self-audit program allows a holder to come into compliance with the unclaimed property laws by conducting a self-review and then completing a self-audit form on-line, without undergoing an on-site audit and without the assessment of penalties, interest and even audit fees.

Holders should note that these letters disclose that the states are working with Verus Analytics LLC, a third-party auditor, to assist with these self-audits.

The letters urge holders to first confirm receipt of the self-audit notification letter via an email to Verus and then to complete the Self-Audit form. Once the form is completed, Verus will contact the holder regarding next steps and will assist the holder in reporting any unclaimed property. The Self-Audit form is to be completed even if the holder believes that it is not holding unclaimed property.

The failure to respond to the self-audit notice and identify any unclaimed property in the holder’s possession is considered an intentional act in violation of the unclaimed property laws and subjects the holder to an on-site audit, including the assessment of penalties and interest.

New York: The Invitation to the Voluntary Compliance Program

The New York State Controller’s Office (OUF) has also begun mailing letters to holders (often to senior corporate executives) that conduct business in the state but which the state believes are not reporting unclaimed property as required under the unclaimed property law.

The letter urges holders to come into compliance by first completing a Self-Audit Checklist, consisting of an online survey that assists holders in identifying whether they are holding any unclaimed funds. Holders are instructed to complete the survey even if the holder does not believe that it has any unclaimed property to report. If the survey results indicate that the holder may be holding unclaimed funds, the survey serves as the holder’s application to the state’s Voluntary Compliance Program (VCP).

Per the letter, the VCP may entitle the holder to “amnesty” from penalties and interest which may be assessed under Section 1422 of New York’s unclaimed property law.

Holders who do not respond in a timely fashion, or do not respond at all, may be sent additional invitation letters, and may subject themselves to an audit or exclusion from the VCP in the future.

Holder’s Next Steps

Our recommendation is for the person responsible for unclaimed property compliance to make recurring internal inquiries to determine if an unclaimed property letter has been received from any state’s unclaimed property office.

Corporations that receive a letter from Delaware, and/or any other state, may want to consider contacting an unclaimed property advisor who has the experience to assist holders in understanding the options that may be available and determine the course of action that may need to be taken.

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*Content contained in this article is considered accurate as of the publish date.


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