Fidelity Bond Trust provides extra protection
By Debbie Wise
AAC Board President
I am extremely proud of the AAC Risk Management Fund (AACRMF). Created in 1986, it serves county-specific needs for protection. It is not an insurance program; however, it does provide general liability, auto liability and physical damage, and property protection in addition to volunteer fire department programs. All 75 Arkansas counties are members of the program.
One thing the AACRMF does not provide is fidelity bond coverage for actual losses through fraudulent and dishonest acts caused by employees or officials. For instance, if an employee or elected official embezzles money from a county, AACRMF does not cover that loss. That falls under the purview of the State of Arkansas’ Self-Insured Fidelity Bond Program.
The program is one of many overseen by the Arkansas Insurance Department (AID). It is administered by the Arkansas Governmental Bonding Board. I am honored to serve on this board along with the president of the Arkansas Municipal League, the director of the Department of Finance and Administration, and the Commissioner of Education for the Department of Education. Arkansas Insurance Commissioner Alan McClain serves as chairman of the board.
State agencies, counties, municipalities, and school districts have the option to participate in the Self-Insured Fidelity Bond Program. The policy limit is $300,000 per fraudulent or dishonest act that is punishable under the criminal code. In other words, the individual who committed the act could be tried and convicted, could plead guilty or nolo contendere, or is found guilty. There is a $2,500 deductible for each occurrence.
Each participating governmental entity is already subject to an annual audit, typically conducted by Arkansas Legislative Audit. If an audit reveals an actual loss due to a fraudulent or dishonest act, Legislative Audit must submit a Proof of Loss notice to the Arkansas Governmental Bonding Board. The board then determines coverage under the Bond Program. All bond payments approved by the board, less the deductible, are issued from the Arkansas Fidelity Bond Trust Fund to the affected agency.
I have been a member of the Bonding Board since 2018, when I was sworn in as president of the AAC Board of Directors. I have enjoyed working with Insurance Commissioner Alan McClain and Arkansas Insurance Department Risk Management Consultant Ruth Fernandez.
During my tenure, the Bonding Board has considered numerous instances of theft of governmental funds. Entities that do not participate in the Fidelity Bond Program have limited recourse in recovering what was taken from them. But counties, as good stewards of the public’s tax dollars, are protected.
