Is Delaware Two-Faced?

An overview of the webcast is below with salient points that were discussed outlined in detail below:

• While voluntary, the VDA does require the holder to be cooperative in communicating the status of the submission to the administrator and remain responsive to all questions raised by DBR or the designated accounting firm working with DBR. Frequent status updates are highly encouraged.

• Holders that are uncooperative may risk removal from the program, and subject to interest and penalties. Although not specifically stated during the webcast, the implicit implication was an increased risk of audit.

• Holders that have not engaged outside advocates are encouraged to do so.

• The VDA is not an audit. However, the State expects the holder to conduct a detailed and thorough review of its books and records; simply stating “we have been reporting” is not considered a detailed and thorough self-review. The State recommends holders to conduct a detailed review of a past year and compare results. Findings for the sample year should be reasonably close to the amount reported to the states as unclaimed property. Please note, the State will request limited source documents that were reviewed as part of the validation process. An efficient review will be validated by the State’s advocate, DBR.

• The State will publish a process document the first week of February. This document outlines the validation process that the State’s advocate will employ.

• If applicable, bankruptcy requires a short but detailed memorandum outlining the bankruptcy orders.

• Guidance was provided to holders and advocates regarding the population of stale, dated and voided checks. These items should be researched to determine potential unclaimed property. This does not include checks that have been outstanding less than 90 days or checks that were voided within 90 days from the original issue date. This should assist holders reduce the population of information from prior years that is required to be researched and reviewed.

• A tracing analysis will be conducted for Accounts Receivable to validate the netting process.

• For years that “complete and researchable” records do not exist, liability will be estimated.

• To confirm that Asset Acquisition was properly noted, DBR will request a schedule of assets and liabilities to identify if any of the acquiring assets were put into the books and records of the acquirer.

• Delaware has already closed some VDAs and is expecting to increase frequency over the course of the next several months. For existing open VDAs, the turnaround time should improve with the entire process. Generally, expect a VDA to be completed in 1 year from start to finish. To date, interest and penalties have not been assessed, however the Secretary of State could assess interest and penalties if the holder is not moving forward.

Additional important points and recommendations include:

• Early filers will likely receive preferential treatment. The State and its representatives are anxious to demonstrate success in the administration of the program by completing as many applicants as possible.

• Schedule tasks and commit to a timeline. All companies that have entered into the program should complete a timeline and task list of the specific action items that need to be completed. Holders that anticipate significant delays in meeting their timeline should be aware of the potential consequences, including risk of being disqualified from the program and/or subjected to interest and penalties (or possible future audit).

• Communicate progress regularly to DBR. Provide status updates regarding the completion of VDA Phases proposed by the State either directly to DBR or through the holder’s advocate.

• Respond to inquiries in a timely manner. Questions raised by DBR or its accounting firm should be responded to on a timely basis.

• VDA is not an audit…but, all submissions will require review by DBR and while not an audit, evidence of a self-review will be required. Hence, sufficient time and resources need to be committed to completion of the various Phases set forth by the state.

• Don’t delay. Given the large number of companies that have enrolled in the VDA program, it is important that companies focus on completing their submission well before the June 30, 2015 date. The State and its representatives have emphasized that those that are late to submit and communicate their status will be at greater risk than those who have submitted early. Most companies should allow at least 3-6 months for the state to complete its review, or provide information sequentially as it is completed for review.

• There is still time. There is still ample time for those that have entered the program to complete the required steps and receive all of the benefits under the VDA program. The State will commence monitoring progress of participants. It is important for holder’s to be vigilante in making necessary adjustments and communicating any delays to DBR.

• Still on the fence? Companies have until June 30, 2014 to join the VDA program and receive the benefits but there is little time to waste as completion of all phases still must be completed before the June 30, 2015 program deadline. If your company is still not certain whether you wish to participate, attempt to resolve unanswered issues and communicate your intention to participate no later than June 30, 2014.