National Association of Unclaimed Property Administrators

Reporting & Compliance 201 Gary Qualset, CPA Division Chief, Unclaimed Property Division, California State Controller's Office Phillip Carlton Assistant Director, Unclaimed Property Division, Florida Department of Financial Services

The Foremost Authority on Unclaimed Property

National Association of Unclaimed Property Administrators

When does the clock start ticking? • No Owner-Generated Activity • Owner has not indicated an interest in the property or account

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National Association of Unclaimed Property Administrators

Activity that Resets the Dormancy Period • • • •

Written Communication Phone Contact Electronic Contact Some Other Indication of Interest

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National Association of Unclaimed Property Administrators

What is NOT considered activity? • Recurring, automatic electronic transactions • Statements or notices mailed to the customer not returned as undeliverable (RPO) • Unrelated Purchases or Charges • Unrelated Payments • Interest Posted

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National Association of Unclaimed Property Administrators

Dormancy Charges When can a fee be imposed based on inactivity?

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National Association of Unclaimed Property Administrators

State Provisions on Dormancy Charges

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National Association of Unclaimed Property Administrators

Extensions Why? • Ensure Compliance • Establishes “Good Faith” • Reduces Audit Risk

When? • Written request prior to reporting deadline (# of days prior varies among states) 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Reasons to Request an Extension • Technology Changes or Updates • Change in Personnel • Transfer Agent Change • Reporting Agent Change • Merger or Acquisition • Natural Disasters 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Property Reported in Error • An error is a property that has been improperly reported to the state. • The property needs to be returned to the reporting organization for reinstatement to the customer’s account.

2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Examples of Why a Property is Reported in Error • Timely Activity • Customer Contact • Linkage of Account

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National Association of Unclaimed Property Administrators

What is a Holder Reimbursement? Return of monies to the holder after the annual Unclaimed Property Report has been filed and the money has been received by the state

2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Holder Reimbursements Advantages for Holders • Holder can readily refund the owner Warning – confirm that state has not already paid the owner.

• Maintains Customer Goodwill • Makes Holder Whole 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Holder Reimbursements Common Reasons to File • • • •

Property Reported in Error Property Previously Paid Customer Contact Linkage of Account

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National Association of Unclaimed Property Administrators

Filing the Reimbursement Claim • Submit NAUPA Holder Request for Reimbursement Form

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National Association of Unclaimed Property Administrators

Filing the Reimbursement Claim Contact State UP Office for specific requirements • Forms Accepted and Method of Submission • Property Information Required • Proof of Reimbursement

2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Reciprocal Reporting The process whereby states who routinely accept property belonging to other states annually forward that property to the appropriate states.

2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Reciprocity State Matrix and Definitions This information attempts to define the concepts involved in reciprocity by compiling current state property exchange practices.

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National Association of Unclaimed Property Administrators

Reciprocity Matrix

Incidental Property – Ten or fewer properties, totaling $1,000 or less, which belongs to a state other than the state to which the properties were remitted. Not Allowed – California does not participate due to the dual reporting owner notice requirements. Other states – AR, IA, NV

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National Association of Unclaimed Property Administrators

Reciprocity Considerations • Reciprocal reporting is not required – it is entirely voluntary. • Property must be remitted and reported per the laws of the Entitled State, not the Receiving State. • Receiving State cannot indemnify the holder for property not belonging to that state. 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Reciprocity Considerations • Use the Receiving State’s report format when reporting to a Receiving State. • Use the Receiving State’s report/remit date(s). • Holders may not report safe deposit boxes (or other tangible property) through a Receiving State.

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National Association of Unclaimed Property Administrators

Reciprocity Considerations Receiving States are not responsible for: • Notifying the Entitled State of the holder’s intention to file through a Receiving State. • Determining whether the holder has complied with the Entitled State’s laws. • Waiving or imposing penalties and interest incurred by the holder for non-compliance under the Entitled State’s law. 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

RECIPROCITY IS NOT INTENDED FOR: • Reporting most, if not all, property to a state solely on the basis of that state’s willingness to accept property for a lot of other states. • Reporting past due property to a state other than the Entitled state to avoid penalties and interest. • Reporting to a state other than the Entitled state because you like its laws better.

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National Association of Unclaimed Property Administrators

Best Practices • Develop an unclaimed property program. • Develop and maintain detailed processes and written procedures for tracking and reporting unclaimed property. • Assign responsibility Identify personnel responsible for preparation of reports. • Conduct internal training. • Monitor changes in unclaimed property laws. 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Best Practices • Conduct internal audits of unclaimed property processes and procedures. • Research outstanding items. • Balance general ledger liability to unclaimed property database. • Procure technical assistance. • Monitor third party agents. • Get into compliance with applicable state requirements. 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Best Practices • Utilize computer systems that track the date of last contact with account owner. • Include escheatment information in company newsletters. • Make address change forms available – be prompt updating your systems. • Perform due diligence. • Communicate with owners. 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

California’s Reporting Process Overview

1. Annually Review Files for Unclaimed Property

2. Perform Holder Due Diligence 3. Submit Holder Notice Report 4. Respond to Owner Claims SCO Notices (receive 14F form) 5. Send Holder Remit Report & Remittance 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Holder Action: Perform Due Diligence  Due Diligence is the process of attempting to locate the owner(s) of dormant property valued at $50 or more before escheating property to the State  Due Diligence is mandated by CA state law (CCP 1513.5, 1514, 1516, and 1520)  Holders are responsible for notifying property owners 6 – 12 months before the deadline for reporting the property to the State  Reasonable efforts must be made to locate the owners and send a notice (1st class or Certified mail) to their last known address  If contact is made with the property owner, the property is no longer dormant/unclaimed

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National Association of Unclaimed Property Administrators

Holder Action: Perform Due Diligence • Mail the Due Diligence Letter – Centered Heading that reads: “THE STATE OF CALIFORNIA REQUIRES US TO NOTIFY YOU THAT YOUR UNCLAIMED PROPERTY MAY BE TRANSFERRED TO THE STATE IF YOU DO NOT CONTACT US”

– Notice must clearly state that the property will escheat to the State if a timely response to the notification is not received – Notice must be sent if the Holder has in its records an address for the apparent property owner, which the Holder’s records do not disclose to be inaccurate – Notice can be sent electronically with the property owner’s consent or mailed to the property owner’s last known address – Notice must include a form for the owner to indicate an interest in the property (except for Safe Deposit Box Property) 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

California’s Two-Report Process • Notice Report – Do Not Remit Property ($) • Remit Report – Remit Property ($)

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National Association of Unclaimed Property Administrators

Submitting the Holder Notice Report • Notice Report – Do Not Remit Property ($) • First report in the two-report process • Due Annually • Submitted after Holder Due Diligence is performed • Due before November 1 • Must be in correct format (Standard NAUPA II) • Includes a complete Listing of all properties that are still unclaimed 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Report Property Detail and Aggregates • Owner Property Information: • Name, Address • SSN, DOB

• Code Details – Pay Attention to Them: • Relationship Codes • AN-And, BF-Beneficiary, OR-Or, AO-And / Or, + many other codes

• Property Type Codes • Owner Type Codes • OT-All owners except UN-Unknown, AGAggregate 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

After the Holder Notice Report is Received Receipt of the Notice Report and SCO DUE DILIGENCE – Once the Notice Report is received, SCO will send the Holder a Confirmation of Receipt – the 14F (Remit Report Reminder Letter) •

Note: The 14F Form must be signed and returned later with the Holder Remit Report to expedite report processing

• Within 165 days of receiving the Holder Notice Report, the SCO will send out another Due Diligence letter to all property owners listed on the report with properties valued at $50 or greater, and for all stocks and safe deposit box properties •

This letter instructs the property owner to contact the Holder to reclaim their property before it escheats to the State

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National Association of Unclaimed Property Administrators

Submitting the Holder Remit Report Second and final step of two-report process  Remit Report is due between June 1-15 and includes:  UFS-1

 Section F may be edited if property owner contacted Holder  Section A (Check #, EFT #)  CD/Disk in Standard NAUPA II Format  Remittance    

FEIN $ Amount Reported Report Year Company Name

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National Association of Unclaimed Property Administrators

Submitting the Holder Remit Report  Property reported in the Holder Notice Report but subsequently claimed by the owner will be:

1. Excluded from the Holder Remit Report 2. Reported with the appropriate pay or deletion type code and show the remitted amount as zero  List of property owners on the Remit Report must match the list of property owners on the previously submitted Notice Report  No new properties can be listed/remitted; remittances of new properties will be returned to the holder. (Instead submit a Supplemental Notice Report for new prop) 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Submitting the Holder Remit Report Remitting Money ● $20,000 or more ● Holders shall submit payment of unclaimed cash in the amount of $20,000 or more by electronic funds transfer, pursuant to CCP section 1532. Failure to make payment by electronic funds transfer when required will result in the assessment of a 2% penalty ● Holders may remit funds by Automated Clearing house (ACH) Debit, ACH Credit, Fedwire, or International Funds Transfer

● Amounts under $20,000 ● Holders may remit funds by EFT or check 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Avoid Interest, Fines, and Penalties  Submit your Reports on Time  California has a 12% per annum interest charge on late reported property, late reports, and remittances (CCP §1577)

 Remit Property on Time  A fine can be assessed by the courts for willful failure to report/remit/deliver OR filing a fraudulent report

-$100 per day ($10,000 maximum) for failure to report (CCP §1576(a)) -$5,000 – $50,000 for refusing to deliver property (CCP §1576(b))  A Civil Penalty of 2% of the payment amount can be administratively assessed when the remittance is over $20,000 and was not remitted by EFT (CCP §1532(g)) 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

CA Outreach & Compliance Resources http://sco.ca.gov/upd_rptg.html  Holder Handbook  NAUPA Filing Instructions  EFT Forms  Reporting Forms  Newsletters  Notice to Holders  Free email subscription – Holder Notices, Events & Quarterly Newsletters http://sco.ca.gov/ucp_holder_notification_email.html 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

CA Reporting Resources List Information for Holders: SCO website (sco.ca.gov): Holder Handbook, EFT guidelines, NAUPA II instructions, reporting forms: www.sco.ca.gov/upd_rptg.html Unclaimed Property Law: www.sco.ca.gov/upd_lawregs.html Due Diligence Requirements, Dormancy Periods and Reporting Cycle tables: www.sco.ca.gov/upd_rptg.html National Association of Unclaimed Property Administrators (NAUPA): Link to free software: www.unclaimed.org/reporting/free-holderreporting-software/ 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

CA Contact Information California State Controller’s Office Unclaimed Property Division 10600 White Rock Road, Ste 141, Rancho Cordova, CA 95670 Holder Outreach and Compliance Unit : (916) 464-6088 [email protected] Reporting Unit : (916) 464-6284 [email protected] Questions regarding EFT Remittance: (916) 464-6220 [email protected] Visit our Web site: www.sco.ca.gov 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Unclaimed Property Audits & Voluntary Compliance Programs

2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Unclaimed Property Audit • Authority to Audit - State Laws • Financial in Nature • Look Back Period – Varies by State • Audit Fees/Fines – Varies by State

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National Association of Unclaimed Property Administrators

Factors Affecting Audit Selection • Legislation • Holder Requested Audit • Reporting History • Inadequate Due Diligence • Industry-wide Noncompliance 2016 National Holder Workshop and Forum

• Corporate Changes • Other State Regulatory Agencies • Request by Management • Random Selection

National Association of Unclaimed Property Administrators

Audit Process • Opening Conference

• Exit Conference

• Letter of Intent

• Audit Conclusion

• Field Work

• Audit Report

2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Audit Process: Opening Conference • • • • •

Overview of Unclaimed Property Cursory Review of Business Entity Explanation of Audit Scope Mutually Agreed Start Date Answer Questions

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National Association of Unclaimed Property Administrators

Audit Process: Letter of Intent • Written Notification to Audit Books and Records • Confirmation of Date/Time • Listing of Requested Records

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National Association of Unclaimed Property Administrators

Records Generally Requested • General Ledger Chart of Accounts • Prior Unclaimed Property Reports and Supporting Documentation • Detailed General Ledgers • Bank Reconciliations and Outstanding Check Listings • Voided Checks • Stock Split/Stock Dividend Records

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National Association of Unclaimed Property Administrators

Records Generally Requested • Unclaimed Property Written Procedures • Descriptions of all Computer Conversions • Corporate Merger or Acquisition Information • Aged Accounts Receivables • Identification of Third Party Administrators 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Audit Process: Field Work • • • •

Assign Audit Coordinator Identify and Interview Key Personnel Review Documentation Request Additional Documentation

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National Association of Unclaimed Property Administrators

Audit Process: Exit Conference • Discuss Preliminary Findings • Request Additional Research and Perform Due Diligence • Recommendations • Discuss Audit Fees • Review Additional Documentation Provided 2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Audit Process: Audit Report • Holder Receives and Reviews Audit Findings • Designated Period of Time to Review and Respond • Holder Remits UP Reports, Property and Fees

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National Association of Unclaimed Property Administrators

Factors Affecting Duration of Audit • Complexity of Audit • Record Availability • Cooperation

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National Association of Unclaimed Property Administrators

Your Rights to Challenge the Audit Findings • Informal Process (varies among states) • Formal Process (varies among states)

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National Association of Unclaimed Property Administrators

Audit Mitigation • • • • • • •

Do not wait for an Audit Notification Treat the Annual Filing as an Internal Audit Process Develop an Unclaimed Property Program Prepare an Unclaimed Property Manual/Procedures Designate an Unclaimed Property Coordinator Create an Unclaimed Property Team Assess all Areas within the Company that may have Unclaimed Property • Identify Potential Unclaimed Property • Control the Identified Unclaimed Property

2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Audit Mitigation • Identify all Third Party Administrators • Perform Due Diligence • Be Familiar with the Unclaimed Property Statutes and Administrative Rules • Monitor any Changes in the Unclaimed Property Statutes and Administrative Rules • Properly File your Unclaimed Property Report

2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Unclaimed Property Voluntary Compliance Programs • Voluntary Compliance Self-Audit Program (varies among states) • Voluntary Disclosure Program (varies among states)

2016 National Holder Workshop and Forum

National Association of Unclaimed Property Administrators

Contacts Visit NAUPA’s Website for Programs Contact Information

2016 National Holder Workshop and Forum