The beginning of a new calendar year is an optimistic time and we wish all our readers a successful 2013!!

As we kick-off 2013, we’re pleased to announce that Moyer & Osibodu has entered into a strategic alliance with Chesapeake System Solutions, Inc.—a premier provider of financial software solutions— to provide comprehensive solutions for unclaimed property compliance. The alliance combines Chesapeake’s Unclaimed Property Compliance System (UPCS®) software with Moyer & Osibodu’s unclaimed property consulting and compliance expertise. The result is a single platform for an end-to-end unclaimed property solution—consulting, compliance, software, and outsourcing solutions under one umbrella that will be available to clients across various industries.

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This year, we’re introducing this new section to our monthly newsletter to share some of the correspondence that comes our way. We hope that you can all benefit from this section in this and subsequent newsletters:

Dear UP Adviser,

Our CFO recently received an audit notice from the state of Delaware and we understand that the audit will be conducted by one of their hired agents. Our company is incorporated in Delaware and we’ve never filed unclaimed property to any state. Our tax department usually handles all state audits, but they are very reluctant to take up the task of managing this audit, partly because they claim “unclaimed property” is not a “tax.” We don’t know where to begin and please help.
Sincerely,
Scared to Death of Delaware


Dear Scared to Death of Delaware,

It appears that you received the Delaware audit notice partly because your company has never filed unclaimed property reports to the state, especially to your state of incorporation – Delaware. Yes, your tax department is correct that unclaimed property is not a tax, but it may feel like one when all is said and done.

I have to be upfront and inform you that this audit will last several years and require both internal and external resources to manage the audit. Your CFO and company should be prepared for a long and time consuming audit, which could result in a multimillion dollar audit assessment if not properly managed. My first series of recommendations are as follows: (i) sign a confidentiality agreement with the state’s hired agent (ii) appoint an internal audit coordinator, either from tax or legal department if applicable (iii) setup an audit steering committee, comprising of individuals from all the operating areas within your company – e.g. tax, legal, treasury/finance, internal audit, accounts payable, accounts receivable, payroll/human resources, etc. (iv) engage external resources, especially if your company does not have the requisite in-house expertise (v) perform a self-audit or risk assessment to identify your unclaimed property compliance gaps and potential exposure before starting the audit, if possible.

I hope you find the recommendations helpful and let’s plan to continue our discussion next month. Until then, focus and enjoy your year-end close.
Good luck to you,
UP Adviser

8 Common Issues found during Unclaimed Property Audits

1. Lack of adequate and complete accounting records during the audit period.
2. Lack of written unclaimed property policies & procedures or lack of compliance with company’s accounting policies and procedures.
3. Failure to maintain copies of all unclaimed property reports filed with the states and the respective proof of payment.

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10 Things You Should Know About Unclaimed Property

1. The states unclaimed property laws originated from old British Common (Escheat) Laws, when in the event of a death without heirs, ownership of the property reverted to the King. Although we still use the phrase escheat in the United States, unclaimed property laws in most of the states are custodial in nature. The states act as custodians of the property and are charged with protecting the interests and property rights of the lost owners.
2. 54 jurisdictions (50 states, District of Columbia, Guam, Puerto Rico and the U.S. Virgin Island) have unclaimed property laws that require companies to file and report their unclaimed property annually, during the Spring and Fall.
3. Unclaimed property is generally defined as intangible (and tangible in limited situations) property that has gone unclaimed by its rightful owner for a specified period of time, usually ranging from one to five years.

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12 Reasons Companies may be selected for Unclaimed Property Audits

1. Operating within a target industry, such as life insurance, title insurance, oil & gas, retail, manufacturing, pharmaceutical, healthcare, securities and financial services.
2. Incorporating in certain states, such as Delaware, New York, Florida, Michigan, California and Texas.
3. Failing to file annual unclaimed property reports to the respective jurisdictions, especially to the company’s state of incorporation. In other words, lack of unclaimed property reporting or compliance history with the state.

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