Less Tried Audit Strategies and Tactics. Presented by: Ann Fulmer, Director, Keane Jameel Turner, Member, Bailey Cavalieri

Transcription

1 Less Tried Audit Strategies and Tactics Presented by: Ann Fulmer, Director, Keane Jameel Turner, Member, Bailey Cavalieri

2 UPPO Presentation Disclaimer Use of the Unclaimed Property Professionals Organization, Inc., (UPPO) name of 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.

3 UPPO Antitrust Statement UPPO has a policy of strict compliance with U.S. federal antitrust laws. UPPO members and/or meeting attendees cannot come to understandings, make agreements, or otherwise concur on positions or 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.

4 Today s Agenda First Responses to Audit Notification Importance of Hiring an Advocate Early On Setting the Stage - Audit Scoping Records Requests and Data Availability General Ledger Account Review Source Documents; Sampling Techniques; Remediation; Projections Hot Topics Securities Industry Temple Inland Litigation Sylvania Litigation Best Defense

5 Audit Defense Background Common Sense Fairness Audit defense is primarily based on the Due Process Clause of the 5 th Amendment Fundamental Fairness/Auditor Independence Balance Holder s Rights with State s Right to Audit Lack of Established Protocols Leads to Abuses Lack of common law precedent and state interest in receiving payments from audits Understand the Landscape Going In Audit is a Major Undertaking - Know what you don t know (Keeping up with audit requests and your regular jobs is a challenge) Manage internal expectations

6 Audit Defense Considerations Important to Set the Tone with an Advocate Managing Auditor s Expectations (will not be a pushover) Advocate can assist with identifying areas of Exposure and Preemptive Arguments Coordination of Participating States and Differentiating State Laws (S/L and look back) Keeping up with Audit Trends/New Arguments and Legal Issues (Non-Participating State Data) Record of all Communications for Lawsuit/Appeal Records Review and Estimation Formula

7 First Responders Audit Notification Letters First Response Take it Seriously/All Hands on Deck Consider Entry Level Issues What Legal Entities are in scope? How Many Participating States? Is my State of Incorporation Participating? Nondisclosure Agreements Cut Off Dates for Addition of States Solicitation of New States Auditor s Compensation Arrangement Osram Sylvania, Inc. v. Cook

8 Scoping Strategies Legal Entities Look Back Period Delaware back to 1981 Most other states 10 years Transactions (Stock Conversions/Redemptions) Mergers and Acquisitions Gift Cards/Payment Cards

9 Managing Records Requests Threshold Issue Relevance of Data Requested Delaware Law data necessary to prepare a Delaware report Challenges to Corporate Purpose Communication of Response Times and Extension Requests Delaware has removed payment of interest from its statute Penalties still on the table and used as a threat Records Formatting Issues (what constitutes books and records ) Availability Timing Sampling and Estimation Non-participating state data

10 General Ledger Review Request for Data Tracking Matrix Bank Accounts: In-scope Disbursement Accounts Open Accounts Closed Accounts Accounts acquired via acquisition of company Disbursement Account Tracking Matrix Complete and Researchable Records Bank Statements, Reconciliations, Outstanding and Void Check Lists

11 Outstanding Disbursements Sampling Methodologies Request sampling parameters Review stratification of check population Remediation Records accepted to prove obligation was satisfied and no longer outstanding Account Owner Confirmations Ongoing Vendor Relationships Utilities, Government Agencies, Charitable Contributions

12 Accounts Receivable General Ledger Aging of Credit Balances; Records needed Offsetting of transactions within the same client; Ongoing client relationships Low Balance / De minims Offsets Tracers Accounting procedures used to resolve outstanding credit balances Avoiding unnecessary work effort Remediation What s accepted vs. Records that should be accepted

13 Third Party Administrators Defining Responsibility of TPA Benefits - Proving ERISA Exempt Equity - Parents vs. Subsidiaries Gift Cards (Use of Gift Card Subsidiaries or Third Party Issuers) Pay Cards Historical Relationships Available Information

14 Shareholder Accounts Strict interpretation of State Requirements regarding Activity vs. Return from Post Office (RPO) vs. Uncashed Distributions. Liberal usage of tools to identify accounts that could be inactive or lost that are NOT mandated by State Requirements. Audit Proposals Strain on Resources

15 Hot Topics New Third-party Contractors Delaware Update Bearer Bonds Temple Inland Update Sylvania Update

16 Best Defense Is A Great Offense Know your weaknesses and work to improve them. Maintain books and records to support unclaimed property compliance and remediation for at least 10 years. Conduct periodic Risk Assessments to ensure ongoing compliance (Internal & Independent). Get Legal Counsel involved early; preferably as soon as Audit Notification Letter arrives. Consider engaging unclaimed property professionals to support the audit (i.e. Outside Counsel and Consultants).

17 Questions??? Contact Information: Jameel S. Turner, Member, Bailey Cavalieri LLC 10 W. Broad Street, Ste. 2100, Columbus, Ohio d: o: f: Ann T. Fulmer, Director, Keane Consulting & Advisory Services 640 Freedom Business Center Dr., Ste. 600, King of Prussia, PA d: c f E.