Delaware Bill to Prohibit Contingent Fee Auditing

As alluded to by Senate Republicans last month and discussed in Delaware Relies Heavily on Unclaimed Property in Budget Process, Senator Lavelle has sponsored a bill to prohibit contingent fee auditing.

If passed as introduced, the bill would add subsections (c) and (d) as follows:

(c) If the State Escheator contracts with a person to conduct an audit in accordance with this Chapter, payment shall not be by commission or by receiving a percentage of the property recovered for the State.

(d) Any contract by the State Escheator with a person to conduct an audit in accordance with this Chapter shall not extend beyond three years.

SB 215 also reminds state employees of their pre-existing duties under Delaware law against post-employment restrictions creating a conflict of interest. This appears to be a response to Mark Udinski leaving his position as State Escheator and immediately joining Kelmar Associates, the state's primary contingent fee auditor of unclaimed property. Before leaving state employment, Udinski and his office authorized numerous audits and assigned them to Kelmar. Commentators, including Tax Analysts criticized Udinski, Kelmar, and Delaware in the wake of the job change.

The bill has been assigned to the Senate Banking Committee. Republicans, a minority in the Delaware legislature, will need to gain the support of a significant number of Democrats in order to pass this bill.

See Also:
New Michigan Law on Audit Practices
Don't let the Delaware Budget Forecast Fool You
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