If your organizational structure includes Delaware entities, you may have recently received or soon receive one of the following:
- An invitation to participate in Delaware’s Voluntary Disclosure Agreement (VDA) program administered by the Delaware Secretary of State’s office; or
- A verified report request from the Delaware Department of Finance.
The following outlines each of these notices.
Delaware VDA Program Invitation
Delaware will encourage participation in the VDA program by sending invitations one to two times per year to companies potentially identified as being out of compliance. For 2024, Delaware anticipates sending invitation letters on February 23 and July 26.
For those receiving invitations, there is a 90-day window to accept the invitation to participate in the VDA program. This invitation should not be taken lightly as any company that does not choose to participate in the VDA program will be subject to an unclaimed property audit administered by the Delaware Department of Finance and its third-party audit representatives. For any companies that received the February invitation letter, a response is due to the Delaware Secretary of State no later than May 24 (assuming the actual issuance date is February 23).
Background
Historically, unclaimed property administration and enforcement belonged to the Delaware Department of Finance along with third-party auditors representing it. In 2012, Delaware developed the VDA program through the Secretary of State’s office as an alternative to the traditional audit route to further promote holder compliance. The VDA program has continued to evolve since adoption.
For each VDA, the Secretary of State will engage one of three third-party vendors to perform most steps of the VDA from the state’s perspective. For the company participating in the VDA, it will primarily interact with these vendors during this process (either directly or through its own advocate firm).
Benefits of the VDA program include limited look-back periods, some flexibility in scope, faster review times than traditional audits, and full penalty/interest waiver on any outstanding balances due.
Delaware Verified Report Request
In addition to the VDA invitations, Delaware recently expanded its verified report request process, pursuant to revisions made to 12 DE Code §1170 by SB 281 in 2022. With the verified report request, Delaware Department of Finance sends letters to holders and requires acknowledgement of receipt within 30 days and completion of requested items within 180 days. This process requires holders to verify a single annual unclaimed property report that they have filed with the state. The items required as part of this process include:
- Completion of the verified report form;
- A list of entities included in the report; and
- A copy of unclaimed property policies and procedures used by the holder, if any.
These items are submitted to one of four third-party firms that Delaware has engaged to assist with the verified report process. Upon reviewing the submitted items, the state or its representatives may initiate a compliance review if they believe that more information is needed to confirm the information reflected on the report. If, after reviewing the additional information, the state believes additional monies should have been escheated, Delaware will make an assessment. Failure to pay may result in a formal notice of examination, which would open up additional filing periods for a full audit subject to interest and penalties.
If, during the verified report process, a company feels it may be beneficial to participate in the DE VDA program, that option could be available depending on where it is in the verified report process and assuming a notice of examination has not been issued.
Next Steps
If you receive either notice from Delaware, it is important to keep response deadlines and potential options in mind, as ignoring these could potentially lead to a full examination by Delaware.
Our knowledgeable professionals at FORVIS can offer unclaimed property assistance, help you navigate the decision process, and provide support during the VDA, verified report, or audit process.
If you did not receive a notice but are still considering a VDA outside of the invitation process, please reach out to a professional at FORVIS.