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OIG Bulletin, November 2020: Bond Requirements and Recommendations for Municipal Employees

Obtaining bonds from certain municipal officials or public employees can help protect your jurisdiction from financial loss.

Table of Contents

Legal Requirements of Bonds for Jurisdictions

Ensuring that your jurisdiction requires adequate bond amounts for certain employees is an important step toward protecting the jurisdiction from financial loss that could arise from employee misconduct.

Bonds ensure that if an employee engages in misconduct, the bond carrier or surety company will cover the jurisdiction’s financial loss resulting from that misconduct. The recent indictment of a former accountant for the town of Uxbridge, and other incidents involving municipal collectors and district treasurers, underscores the importance of obtaining bonds.

Massachusetts law requires the following municipal officials to provide bonds:

The Division of Local Services at the Massachusetts Department of Revenue (DOR) sets minimum bond amounts for each position, based on the amount of money handled by that employee. The chief executive of the municipality determines the actual bond amount required, which may exceed DOR’s minimum.

For more information on minimum bond amounts, please see DOR’s guidance. Note that the jurisdiction pays the premium for any employee who is required to furnish a fidelity bond with a surety company. See M.G.L. c. 41, § 109A.

Additional Considerations

Of course, jurisdictions are free to evaluate their risks and require employees in positions other than those listed above to furnish bonds as well. In particular, jurisdictions may want to consider bond requirements for employees or contractors whose positions involve collecting, controlling or reporting on money or other assets. We encourage your jurisdiction to examine its risks. This can be done in consultation with your legal counsel, your outside audit firm, DOR or your insurance consultant.

Because bonds, much like insurance coverage, are based on risk tolerance, they must be reviewed regularly. In fact, state law requires that public officials annually examine the sufficiency of bonds covering public employees. See M.G.L. c. 30, § 18Therefore, we recommend that you identify a responsible person to keep accurate and timely records, review the bonds at least annually and ask the following questions:

  1. Do we have bonds for all employees for whom bonds are required?
  2. Are the current bond amounts adequate?
  3. Is the bond term in effect, or has the term lapsed?
  4. Does the bond name the individual currently holding the position?
  5. Do the terms and conditions of the bond contain any limitations? If so, are these limitations appropriate?
  6. Are the premium payments up to date?

After conducting this review, you can incorporate bond requirements into your jurisdiction’s ordinances, by-laws, job descriptions and other documents as needed.

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