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2014 Annual Conference March 23 – 26, 2014

© 2014 All Rights Reserved

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Introduction to

Unclaimed Property

Sonia Walwyn – Duff & Phelps

Hermanna Daniels – Rexel Holdings

Deborah Beauchamp – StoneRiver


UPPO Presentation DisclaimerUse of the Unclaimed Property Professionals Organization,

Inc., (UPPO) name or copyrighted materials in this

presentation does not constitute an endorsement by UPPO of

a member, vendor, product or service. The content

represents the opinions of the author and not necessarily

those of UPPO. This information is not intended as legal

advice and should not be used to replace the advice of legal

counsel.


UPPO AntitrustUPPO has a policy of strict compliance with federal antitrust laws.

UPPO members and/or meeting attendees cannot come to understandings, make agreements, or otherwise concur on positions or activities that in any way tend to raise, lower or stabilize prices or fees. Members and/or attendees can discuss pricing models, methods, systems, and applications, as well as certain cost matters that do not lead to an agreement or consensus on prices or fees to be charged. However, there can be no discussion as to what constitutes a reasonable, fair or appropriate price or fee to charge for any service or product.

Information may be presented with regard to historical pricing activities so long as such information is general in nature and does not include data on current prices or fees being charged in any trade area. Any discussion of current or future prices, fees, discounting, and other terms and conditions of sale, which may lead to an agreement or consensus on prices or fees to be charged, is strictly prohibited.




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CPE CreditCPE credit is available at this conference.

However, NASBA rules require proof you attended the

sessions. For UPPO to provide verification of

attendance, you MUST be scanned in AND out of

each session to be eligible to receive credit(s).

Please see the room monitor(s) at the back of room to

have your name badge scanned.


UPPO Essentials


Mission and Purpose

Expand Your Knowledge

Stay Informed

Minimize Risk

Build Relationships




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Member Benefits� Unclaimed property discussion forums

� govWATCH legislative alerts and policy briefings

� Discounted registration fees for conferences and workshops

� Career center

� Networking and volunteer opportunities (ex: Members as Mentors Program, UPPO service blog, and UPPO leadership committees)

� Exclusive members-only content and offers


*Task Force

Professional

Development

Bylaws

E-Learning

Ethics

Finance

Government Relations

and AdvocacyLeadership

Development

Member Services

Members as Mentors

Nominating

UPPO UPPO

CommitteeCommittee

ChartersCharters


Conference EssentialsThe agenda and goals are developed throughout the year by UPPO Board of Directors, staff and members to ensure we accomplish our mission/purpose of expanding knowledge from basic to new information and keeping everyone informed to minimize risk and continue to build relationships.

Conference is made of sessions that are broken down by industry and basic to advanced breakout sessions

2013 conference had ‘quick hits’ vs. 2014 has reform sessions and industry specific audit sessions.




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Come in to conference looking like…

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Leave conference looking like…

http://www.bing.com/images/search?q=unsure+facial+expression&FORM=HDRSC2#view=detail&id=326DB006539D5D13D188513E4BB25554B5438C20&selectedIndex=126


Unclaimed Property Basics

• What is unclaimed property?

– Unclaimed property is…fixed and certain interest

in tangible or intangible property held, issued or

owed, in the course of a holder’s business that

has been abandoned or unclaimed for a specific

period of time (dormancy period) by the rightful

owner.




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Unclaimed Property Basics

• In the beginning…

• We’ve got unclaimed property, so

now what?

• Key Players:

– Owners

– Holders

– States


M&A Activity

AP / Vendor Checks

AR Credit Balances

Payroll

Commission / Bonuses

Bank Accounts

Safe Deposit BoxesRebates

Gift Cards

Stocks and Bonds

Promotions

Unclaimed Unclaimed

PropertyProperty

Retail

General – AP/GL

Financial

Utility

Health care

Hospitals

InsuranceManufacturing

Petroleum

Pharmaceutical

Education

Industry Industry

BreakBreak--out out

SessionsSessions



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Common Key Terms

• Escheat

• Holder

• Owner

• Custodian

• Dormancy Period

• Due Diligence

• Aggregate

• Third Party Auditor

• Negative Report

• Record Retention


Among the States - - Who Gets the Unclaimed

Property?

The United States Supreme Court in a trilogy of cases,

established and re-affirmed a two-pronged approach for

determining priority among states:

• Texas v. New Jersey, 379 U.S. 674 (1965)

• Pennsylvania v. New York, 407 U.S. 206 (1972)

• Delaware v. New York, 507 U.S. 490 (1993)

What Are the “Priority Rules” ?

• First Priority: State of the Owner’s last known address, as shown on the

Holder’s books and records, may escheat the unclaimed property, and its

claim is superior to all competing claims.

• Second Priority: If no last known address for the Owner is indicated on the

Holder’s books and records, or if the State of the Owner’s last known

address does not have applicable unclaimed property legislation, then the

Holder’s state of incorporation may escheat the unclaimed property.



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What Unclaimed Property Is NOT

• It is not a tax

• Nexus Standards - - are not applicable

• With few exceptions, there is generally noStatutes of Limtiation (very extensive reach back periods)

• It is rooted in the concept of Derivative Rights

• Generally No traditional administrative remedies (most states)

Laws Governing Compliance

• Uniform Unclaimed Property Acts of 1954, 1966,

1981 and 1995

– Participating and non-Participating States

• Individual state/local laws of each of the 54

Jurisdictions that require Unclaimed Property

Reporting

• Laws of Foreign Countries

Challenges to Compliance

• Lack of uniformity among jurisdictional rules

– 55 different reporting jurisdictions

– Administered by varied state/local agencies

• Legislative changes:

– Shortening dormancy periods

– Changing filing requirements (even less uniformity)

• New and emerging property types and areas of focus

• Increased audit activity; and

• Enforcement of interest and penalties



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How to Ensure “Timely” & “Accurate”

Compliance?

• Establish an Unclaimed Property Team

• Written policies and procedures

– Implementation

– Update timely and consistently

– Security and Internal Controls• Segregation of duties to avoid fraud

– Include all areas that “can” generate unclaimed property (sources)

– Remediation process (due diligence)

– Record Retention


Establishing the UP Team

• Buy-in and accountability from all levels of your

organization

• Commitment to on time and accurate reporting, and

performing due diligence

• Allocation of time and energy to develop, review and

maintain policies and procedures

• All departments working together, sharing

information and data willingly, timely and openly


Policies and Procedures

• Document

• Include all aspects of unclaimed property from start

to finish

• Get buy-in from executive owner and all key

resources

• Regular reviews




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Implementation

• Assessment of your current scenario (prior reporting

history)

• Upstream accounting practices flow to UP

management and reporting

• In-house or out-source initial and on-going

compliance

• UP timelines that impact your P&Ps


Update Timely and Consistently

• Legislation changes frequently

• Dormancy periods, reporting due dates, formats,

delivery methods

• Aggregate thresholds

• Negative reports

• Report and remit to the appropriate jurisdiction


Security and Internal Controls

• Segregation of duties

• Compliance with non-UP guidelines (i.e. HIPAA, GLB,

SEC)

• Data integrity and security – audit controls

• Archive supporting documents and records, prior

year reports, proof of due diligence and other owner

outreach




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Unclaimed Property Sources

• Scan the organization for potential unclaimed

property

• Include all areas that “can” generate unclaimed

property

• Consider your organization’s history, M&A activity,

marketing programs, lines of business and source

system updates


Remediation Process

• Owner outreach

– Due diligence

– Advertising

• Timeline

• Unique letter requirements

• Owner response processing

• Due diligence statements and attestation


Record Retention

• Archiving UP reports

• Retaining UP records

• Retaining supporting documents




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DORMANCY PERIOD

STATUTORY DUE DILIGENCENON-STAT DD

INITIAL POINT OF CONTACT: COLLECT CUSTOMER/VENDOR INFORMATION

POLICIES & PROCEDURES - CONSISTENT ACCOUNTING PRACTICES

Questions• Sonia Walwyn

Duff & Phelps, LLC

[email protected]

(312) 697-4662

• Hermanna Daniels

Rexel Holdings USA Corp.

[email protected]

(972)725-6338

• Deborah Beauchamp

StoneRiver

[email protected]

(319)378-5675


Glossary of Key Terms & Definitions

• Abandoned and Unclaimed Property means tangible and intangible personal property that

has gone unclaimed by the owner for a specified period of time (1,3,5 or 7 years)known as

the Dormancy Period.

• Activity is action generated by an Owner, which has the effect of tolling or restarting the

running of the applicable Dormancy Period and generally includes actions such as making a

deposit or withdrawal, written communication from the Owner, or responding to a due

diligence letter.

• Aggregate Amount means the State determined dollar threshold that determines whether

specific owner detail such as name and address is included on the Unclaimed Property

Report.

• Custodian is one who holds property that belongs to another. The property does not belong

to the Custodian. Holders can hold property as custodians on behalf of 3rd parties and could

have obligations to report and remit said property if contact and communication with the

owner is lost during the Dormancy Period. Most states also serve as custodians for unclaimed

property remitted to them during the filing process on behalf of missing or lost owners.




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• Dormancy Period is the period of time that a Holder can maintain possession of a liability

before it is required to be reported and remitted to a state. Dormancy Periods vary by state

and property type and generally begins to run on the date the property is payable or

distributable to the owner (e.g., the date an uncashed check or credit balance was issued)

and continues to run until either the Owner engages in Activity related to the property or the

prescribed statutory period expires.

• Due Diligence is the degree of effort required by law that a Holder must perform to locate

the Owner before reporting/remitting property to the state. Generally speaking, the required

activity involves the Holder sending some form of written notice to the Owner. Most states

have specific Due Diligence provisions that address the timing of the notice, the manner of

mailing the notice, etc. Many jurisdictions have a monetary threshold relieving the Holder of

the Due Diligence requirements for small dollar amounts.



• Escheat refers to the legal transfer of property to a state, whereby the state becomes the

owner of the property. There are a few states that operate under a true "escheat" provision

as most states have "custodial" statutes that do not diminish the Owners’ right to property,

but allow the states to maintain custody of the property solely for the benefit of the Owner.

Used interchangeably with unclaimed property

• Holder means a person in possession of property belonging to another such as a vendor,

customer, employee or shareholder and has the obligation to file and remit the unclaimed

property to the applicable state once the Dormancy Period expires.

• Negative Report is an Unclaimed Property Report in which the Holder certifies that it has no

Unclaimed Property to report for the specific reporting period. Some jurisdictions do not

require Negative Reports if a Holder has no property to report, while other require the filing

of a Negative Report.



• Owner is the person or persons to whom a liability or an obligation is owed. Includes but is

not limited to vendors, customers, employees and shareholders .

• Record Retention is the period of time in which Holder should maintain records to confirm

compliance with the states’ unclaimed property laws and to disprove the presumption of

abandonment on audit.

• Third Party Auditor (TPA) are independent accounting firms that are hired by the states,

usually on contingent fee arrangements, to audit the books and records of Holders to

determine their compliance with the unclaimed property laws of the states.

– Examples: Kelmar & Associates (Kelmar), Specialty Audit Services (SAS).


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