Delaware Sends Additional Unclaimed Property Audit Notices February 2019

Summary

Delaware Sends Additional Voluntary Disclosure Agreement (VDA) Program Invites & Audit Notice Letters

Delaware reached out to an additional group of companies through a series of correspondence issued on or around February 15, 2019. A previous wave of letters was sent last October. These letters seek to inform holders to participate in the state’s Unclaimed Property VDA Program (SOS VDA Program) based on a record of non-compliance. If holders do not participate, they risk being audited by the Department of Finance. Companies that do not act within 60 days are expected to receive audit letters thereafter. Companies should also be aware that they may be audited by other states that piggyback Delaware onto the audit. In such cases, Delaware law does not require a 60 day notice.

Targeted companies now include middle market companies that maintain annual revenues of $100M and above. See Sample Reach Out Letter.
 

Details

What to Do

Given the above, companies that receive this notice should:

1. Determine if your organization has received prior Delaware correspondence;
2. Determine what historical compliance, if any, has been with the state of Delaware;
3. Determine record retention policy for banking records, A/R records, general ledgers, etc.;
4. Determine if policy and procedures exist around unclaimed property (current and historical);
5. Evaluate the VDA Decision Tree; and
6. Take action immediately where appropriate.

If your organization has received an “audit notice,” it is important to reach out to us as soon as possible for best practices on blocking other states from joining the audit and mitigate exposures. Even if an organization has not received a notice, the above steps are best practices for addressing escheatment matters and provide for reduced look-back periods for those entering sooner rather than later. Moreover, some companies, especially decentralized organizations, may have received a letter but it was never routed to the appropriate department, which without following the steps above, may lead to an audit. For those that have received audit letters, you should contact your client service professional at your earliest convenience for best practices and steps you can take to mitigate additional state exposure if timely addressed.
 

Companies at Highest Risk

1. Incorporated in the state of Delaware, or
2. Located in other states with significant operations in Delaware who have not addressed or who have underreported their unclaimed property with the state.

 

BDO Insights

BDO has significant experience with Delaware’s Secretary of State VDA Program and Audit Divisions. BDO has successfully assisted hundreds of clients in the Delaware VDA program and on audit through our preapproved review process and relationships.

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