Elevate Your Compliance Program

The likelihood of an unclaimed property audit has increased due to several factors, including the proliferation of third-party auditors, realization by states that significant amounts are involved, and the escalation of unclaimed property litigation. Escheat compliance is no longer optional and being audited is not a matter of if, but when.

Regardless of prior escheat compliance history, an audit can be a disruptive and costly event for any organization. You can reduce the impact of unclaimed property audits with a few strategic actions. Limit the audit’s scope and develop ground rules. Ensure you have a documented and effective compliance program in place. Build audit-defense strategies into recordkeeping and finance protocols.

MarketSphere Unclaimed Property’s audit services team has been through hundreds of audits, many of us on the other side of the table as auditors in previous positions. We use this expertise to partner with clients to develop audit defense strategies specific to each of your circumstances.

Reduce your risk of audit and minimize your exposure related to historical non-compliance.

For years after the Uniform Law Commission (ULC) established unclaimed property regulations for states to follow, some state administrators were not able to dedicate resources to enforce the laws. As a consequence, many holder organizations became lax in reporting. Some companies still are holding years of unclaimed property that should have been reported or routinely have been writing it off. If an audit is conducted and the facts indicate noncompliance, auditors are allowed by law to assess large escheatment amounts, penalties and interest that can amount to many times the original value of the property.

MarketSphere has a streamlined program to assist non-reporting or under-reporting holders to come into compliance cost-effectively and efficiently.

Exposure Assessment
We review your financial processes, data and reporting history to assess the company’s potential exposure under audit, then identify available ways to come into initial compliance with the least possible risk and cost.

Risk Mitigation
Based on uncovered areas of exposure, we work with you to execute the best risk mitigation strategy. Strategies often include making arrangements with one or more states to execute Voluntary Disclosure Agreements (VDAs).

First-Time Filing
We determine amounts owed to all states, find legal exemptions, complete due diligence, then report and remit amounts due. We help you establish efficient annual policies and procedures to help ensure compliance in years to come.

A VDA is an important tool in a company’s unclaimed property mitigation toolbox, which allows the company to become unclaimed property compliant more easily.

VDAs Provide 3 Main Benefits:
1. Allow the company to perform a self review vs. a state or third-party auditor
2. Mitigate the interest and penalties that might apply to late reported property
3. Shorter look-back periods and other generally more favorable review procedures

MarketSphere is well versed in managing and completing the VDA process in all jurisdictions that offer them. Our expertise encompasses the below and much more:

• Scoping to analyze the company’s entity structure, merger and acquisition history, accounting processes and transaction flows that may generate unclaimed property.
• Quantification of potential liabilities to validate source information against financial records, research and resolve potential unclaimed property, perform dormancy analysis, and identify exposure on a state-by-state basis to determine the best course of action and potential need for VDA(s).
• Submit to the State materials in conformity with the state voluntary program and answer questions on source documentation, methodology, or testing process performed.
• Close by verifying and executing closing agreement including all in-scope entities, types of property, and years reviewed.

Today, the states have more tools than ever to determine whether companies are in compliance with unclaimed property statutes and to identify audit targets. Before an audit occurs, the best approach is a proactive one which allows a company to understand their unclaimed property risk. Once risk is identified, mitigation strategies can be developed. A VDA is an important tool in your unclaimed property mitigation toolbox, which allows organizations to become unclaimed property compliant, and limit the risk of an audit, and generally eliminate interest and penalties associated with late properties.

States continue to enforce their unclaimed property laws, whether by invitation to enter into a formal voluntary disclosure program, request to perform a self review, compliance reviews and/or formal audit or examination. If holders do not respond to state outreach, states likely will escalate to an audit. MarketSphere’s unclaimed property experts have supported and been an advocate for countless companies through the VDA process, ranging from the Mid-Market to the Fortune 50.

You don’t have to wait for an audit notice letter or VDA invitation to show up in your mailbox.

MarketSphere long ago identified early assessment as an important step to identify gaps, polish compliance processes and policies, and mitigate audit risks. Using results of an assessment, you’ll establish proper escheatment practices, which can lead to a reduction of management costs, escheatment amounts, and audit findings. Assessment can even help improve general recordkeeping, streamline day-to-day operations, and help protect a company’s reputation.

“Don’t chase the cattle, fix the fence.”

Too much focus on surface problems, rather than digging into underlying causes of unclaimed property is like the farmer who keeps having to round up the cattle because he hasn’t fixed the latch on the fence. MarketSphere’s aim is to help you fix the fence.

— Don DeCelles, MarketSphere Unclaimed Property Specialists

Every company’s situation is different, but nearly every organization must identify potential unclaimed property risks and liabilities to avoid damage to finances, resources, and reputations. It’s much better to uncover potential risk before an audit. The problem is you practically need a degree in unclaimed property to understand all the nuances of the laws and escheatment processes.

Through a highly consultative MarketSphere Risk & Exposure Assessment, we go below the surface to identify underlying unclaimed property issues. Using proprietary software and many years of experience, we identify your largest, most sensitive exposures, focusing first on “upstream” processes within your organization that could cause unnecessary stale-dating of property. 

We’ll present options for process improvements based on your company’s specific circumstances. Then, we’ll help you select strategic actions for the most effective insulation from risk, whether you’re hoping to avoid a future audit or better manage a scheduled audit. 

We can even tell you how much it likely will cost to achieve full compliance and help you present the facts to senior management, so they will better understand the potential consequences of doing nothing.

Mergers and acquisitions present distinct unclaimed property challenges. If your company is the acquiring entity, understanding the consequences of historical non-compliance of an entity being acquired can help to proactively mitigate inherited risk and provide an opportunity to integrate historical risk into the M&A transaction if it is not yet finalized. If your company is a potential target for acquisition, compliance with unclaimed property laws can not only assist you with negotiations with the acquiring entity but can also make you a more attractive target for acquisition.

Whether you are the acquiring entity, or the entity being acquired, an additional factor to consider is that in today’s unclaimed property environment, companies that have completed recent mergers or acquisitions often find themselves at greater risk of unclaimed property audits. Consequently, resolving any historical issues can significantly reduce the risk of an unclaimed property audit.

Ultimately, if unclaimed property was not addressed prior to the merger/acquisition, it should be on the short list of processes to be reviewed as part of the integration. This will allow for the acquired entity’s unclaimed property processes, potential liabilities, and filing history to be evaluated to determine the most appropriate next steps for compliance. If the acquired entity is not compliant with unclaimed property laws, there is still the opportunity to mitigate risk by evaluating state amnesty (a.k.a, VDA) programs in an effort to mitigate audit risk and potential penalty and interest exposure.

It’s important to be able to address unclaimed property issues expediently, so you can identify solutions and assure your company’s compliance as soon as possible, whether it’s to support an audit or the current reporting cycle.

Compliance and reporting of unclaimed property involves irregular cycles, multiple governances, and various accounting processes. For those reasons, to reduce costs and risks, specific unclaimed-property-centric policies and procedures are necessary.

MarketSphere’s professional unclaimed property advisors are experts at analyzing client conditions, identifying best-practice policies and procedures, and helping your staff implement them to achieve specific goals.

Process Analysis 

We gather information, review your current unclaimed property methods and interview key representatives from each functional area of your company to help us understand your situation clearly and better meet your needs.

Development

We create a customized document using industry best practices and build a centralized compliance function into your own operational infrastructure. It’s transferrable, so anyone can take it over after operational changes.

Implementation

We work with you to incorporate the new policies and procedures into your company, including performing a comprehensive unclaimed property training seminar for any staff impacted by the new processes.