DOF Regulations were finalized on October 1, 2017, becoming effective ten days after publication on October 11, 2017. Holders that received an examination notice from the Department of Finance on or before July 22, 2015 may convert its Department of Finance examination into the SOS VDA Program. Form NOI COV must be received by the Department of State by December 11, 2017 for the submitting Holder to be eligible for conversion. Holders undergoing a securities examination, however, in which estimation is not required, may not convert. Eligible Holders will also have the option to participate in an expedited audit.
Below are documents related to Converting an Audit to a VDA:
Pursuant to 12 Del. C. § 1172(b), any Holder currently under audit that received a notice of examination from the State Escheator on or before July 22, 2015, except any securities examinations in which estimation is not required, may convert the pending examination into a review under the SOS VDA Program under 12 Del. C. § 1173.
Benefits for Holders that enroll in the SOS VDA Program include the following:
It is expected that for many Holders the scope of the audit has been determined based upon property types and/or included entities. Since most of the analysis and review performed to date by the Holder will be based on the property types / entities scoped in by the auditors, in the interest of efficiency, Holders are expected to, at a minimum, utilize the same audit scope in the VDA.
For Holders converting to a SOS VDA, the Department of Finance will provide a memorandum to the Department of State and the Holder outlining the previously agreed-upon scope of the audit. This is a potential starting point. In those instances when the same scope is utilized additional information related to the scope of the VDA may not be required.
No. Besides the scoping memorandum referenced above, the Holder’s audit work papers will not be transferred to the Department of State. There will be no coordination or consultation with the Department of Finance or any third-party audit firm regarding the Holder’s audit and the Department of State.
No, Holders will not be expected to start from the beginning of the VDA process. Instead, the expectation is that Holders will utilize the records reviewed and analysis performed to date in the audit, as well as perform any additional self-review required, in order to present the Holder’s findings of past due unclaimed property liability to the Secretary of State for validation, and ultimately settlement. Holders that convert their examinations into SOS VDAs are encouraged to work with the Department of State (and its assignees) from the date of conversion to chart an efficient path to conclusion based on the work that has been performed to date, and to resolve concerns or issues prior to the presentation of a final SOS VDA report and schedules. When the VDA deliverable and schedules are presented, the findings will be validated by the Department of State in accordance with the Implementing Guidelines and SOS VDA Regulations.
If Holders have formally resolved specific property types and/or entities in an executed settlement agreement with the Department of Finance prior to converting to a SOS VDA, the SOS VDA will only cover any remaining entities and property types. If no formal settlement has been reached by the conversion deadline as to certain property types or entities, then Holders must elect to either remain in the audit, convert the entire audit into a VDA, or convert the audit into a fast-track audit.
No, only the general ledger portion of the examination may be converted. Pursuant to 12 Del. C. §1172(b), securities examinations that do not require estimation are not eligible to convert.
Pursuant to 12 Del. C. §1172(b), the look back period for examinations that convert to VDAs is ten reporting years from the year the original Notice of Examination was received by the Holder.
The Secretary of State expects every SOS VDA enrollee to reasonably estimate liabilities related to periods for which the Holder’s records are unavailable to prepare a report of presumed past due unclaimed property liability. Estimation is not required for non-Delaware domiciled entities. Estimated unclaimed property for any period a Holder determines it does not have available records would be reportable to the Holder’s state of incorporation or formation.
On July 1, 2017, the Department of State published final regulations relating to estimation in the SOS VDA Program. The regulations address the scope of a SOS VDA, permissible base periods, items to be excluded from the estimation calculation, aging criteria for outstanding and voided checks, and the definition of what constitutes complete and researchable records.
Here is a link to the final SOS VDA Estimation Regulations:
If a settlement cannot be reached on a particular property type or for a particular entity, the property type or entity will be excluded from the final settlement and release agreement. Pursuant to 12 Del. C. § 1173(a)(4), any property types or entities excluded may be referred to the State Escheator for examination. Similarly, if a settlement cannot be reached on any property type or entity, the Holder may be referred back to the State Escheator for examination.
Holders eligible to convert their audit into a SOS VDA must elect to convert within 60 days following the adoption of regulations regarding estimation that are promulgated by the Department of Finance. On October 1, 2017, the Department of Finance finalized the regulations, becoming effective ten days after publication on October 11, 2017. Consequently, Form NOI COV must be received by the Department of State by December 11, 2017 for the submitting Holder to be eligible for conversion.
Eligible Holders must file an executed copy of a Disclosure and Notice of Intent to Convert Unclaimed Property Examination into a Review under the Secretary of State’s Unclaimed Property Voluntary Disclosure Agreement Program (“Form NOI CONV”), which must be received by the Department of State by December 11, 2017. Form NOI CONV must be signed by a duly authorized officer of the Company that is seeking to convert, and may be delivered to the Department of State in the following manner:
A PDF copy of this form which has been executed by an officer of the Company can be sent via email to SOS.VDA@state.de.us.
Alternatively, Holders may send a copy of this form which has been executed by an officer of the company via overnight or regular mail to:
Secretary of State, State of Delaware
ATTN: SOS VDA Program
Townsend Building, 1st Floor
401 Federal Street, Suite 3
Dover, DE 19901
Legal Disclaimer: The materials contained herein are intended to provide information in regard to the subject matter covered. The Delaware Department of State is not engaged in rendering legal, accounting, or other professional services. If legal advice or other professional assistance is required, the services of a qualified professional should be sought.