Most businesses will have to go through the process of reporting unclaimed property at some point in time. Despite this being a shared experience for almost all business owners and their employees responsible for assisting with the process, many still dread the time they finally have to do so.

Whether businesses have reported unclaimed property in the past or are coming up on their first time doing so, they may receive correspondence from a state about the process. However, the subject matter of this correspondence can vary by business and by state.

These letters may be an invitation to join a voluntary disclosure agreement (VDA) program, a compliance review request, a self-audit request, or an official audit notice. No matter what the subject matter is of the letter, the business receiving it cannot ignore it.

Let’s dive a little bit deeper into the different types of unclaimed property correspondence businesses can receive.

Businesses that are required to report unclaimed property to the state of Delaware may receive an invitation to join its VDA program. Typically, businesses are sent these letters when they have failed to report unclaimed property to the state when they should have done so in the past. This invitation encourages them to take the necessary steps to report any overdue property and avoid facing negative repercussions.

Furthermore, when a business receives an invitation from Delaware to join its VDA program, the CEO, CFO, or corporate counsel often receives it. Unfortunately, these individuals typically do not know what to do with it.

However, it is absolutely imperative that they do not ignore it, as doing so will likely trigger a full-blown audit of the company by the state. This typically occurs because the state of Delaware is required to invite a company to participate in its VDA program if it suspects it has failed to report unclaimed property before it can initiate an audit. Thus, if this letter goes unaddressed, it is extremely likely an audit will commence.

Additionally, businesses who file a corporate tax return in the state of California should be aware of the attestation on unclaimed property compliance.

When filing their California Corporate Tax Return, they cannot ignore this series of questions:

Has this business entity previously filed an unclaimed property holder remit report with the State Controller’s Office? If yes, when was the last report filed and the amount last remitted?

These questions are found on CA state tax forms 100, 100S, 100W, 565, and 568.

Companies are strongly encouraged to answer these questions truthfully. If they have never reported unclaimed property with the state of California and believe they may have a liability to the state, they have options to turn over the property voluntarily through California’s Voluntary Compliance Program. Thus, companies that answer the first question with “no” put themselves at risk of further compliance efforts from the state, including an unclaimed property audit.

Another type of unclaimed property correspondence businesses may receive is a compliance review letter. This letter requests that the receiving company provide the sending state with documentation that verifies or substantiates its most recent report of unclaimed property. Furthermore, the business may be required to prove why a certain piece of unclaimed property was not reported.

Business owners should be aware that the compliance review process varies by the state that requests it. Generally, however, compliance reviews can involve single or multiple report years.

Furthermore, the compliance review process may also be referred to as a verified report process, such as in the state of Delaware.

Here is an explanation of the process per the state’s website:

The Verified Report Process is a one-year, limited review of a holder’s most recent annual filing or non-filing, as authorized by 12 Del. C. § 1170. The Verified Report Process is conducted by the State of Delaware, Department of Finance, Office of Unclaimed Property (“OUP”). It is not an examination or audit, but rather a vehicle for the State and the holder to review and correct any errors or oversights in the most recent annual filing, as well as an educational opportunity for both the State and the holder, without escalation to examination or other regulatory consequence. It is the OUP’s expectation that the holder responds timely, completely, and accurately to the Verified Report Process after thorough review of its compliance efforts for the parent company, its subsidiaries, and related entities.

When it comes to unclaimed property correspondence, businesses may also receive a self-audit request. A certain state will request r a company to perform a self-audit if it believes there is a level of non-compliance.

Self-audits are typically requested of a business by one state at a time as opposed to full audits that can be conducted by multiple states. Many states that send out self-audit requests to businesses have formal processes that must be followed to identify possible unclaimed property that should have been reported or to justify having no property to report.

The last type of unclaimed property correspondence companies may receive is an official audit notice. This letter is a notification to a business from a specific state stating it has reason to believe that the business is not in full compliance with its unclaimed property laws.

However, businesses should be aware that states often contract third parties to complete these audits, so the letter may identify the firm that will be conducting it.

Additionally, businesses that receive one official audit notice from a state will likely receive similar letters in the near future from other states that joined the audit.

Unfortunately, unclaimed property audits take an average of 3 to 5 years to complete, especially if it is a multi-state audit performed by a firm or firms that charge a contingency fee. Furthermore, businesses should understand these audits require dedicating resources, producing years-old records, and completing the document requests that come from the auditors.

If a business receives one of these types of unclaimed property correspondence, the business owner should know it may have been sent for a few different reasons.

Triggers for unclaimed property correspondence include:

 

Regardless of what causes one of these letters to be sent, there are a few steps every business should take when receiving one.

First, a business must remember it cannot ignore the letter. If it does so, a simple request for a compliance review could evolve into a full-blown multi-state audit.

Next, the business should contact Dunbar to receive support in navigating the process the letter requires. The experts at Dunbar can determine if there is actual exposure by examining the business’s past reports, reporting history, and evaluating outstanding/uncashed checks, credits, and other property types. Dunbar’s consulting team has the expertise of four individuals who previously worked for state unclaimed property offices. Our consultants know what the states are looking for and can help a client by serving as the intermediary between the client and the state.

Receiving any type of unclaimed property correspondence can be a bit overwhelming for the business to which it was delivered. However, the business owner and their team of employees who assist with the reporting process must remember they do not have to resolve this matter alone. Dunbar is here to help them tackle any unclaimed property reporting process.

Dunbar is a reputable provider of unclaimed property compliance services, offering a comprehensive suite of solutions to help organizations remain compliant with all applicable laws. With a professional team with decades of experience, Dunbar is the ideal choice for businesses seeking a reliable and knowledgeable provider for their unclaimed property compliance needs.