SOP Library

SOP NO: HR-PA01

Mission: Corporate Administration

Area: Human Resource (HR)

Activity: Personnel Administration (HR-PA)

Title: Fidelity Bond Application/Cancellation

Date Approved/Issued: 04/14/89

Date Effective: 01/01/89

Digest:

This is designed to:

1. Ensure an effective system of bonding NFA accountable officers.

2. Effect the decentralization of the processing of request for application and cancellation of
bonds from the Fidelity Bond Division of the Bureau of Treasury to Treasury Fiscal Officer
III/I assigned in the province for approval by the Treasury Regional Director.
3. Comply with the Bureau of Treasury requirement on regionalized Payment of fidelity bond
premiums.
4. Define the responsibilities of the concerned officials and employees.
5. Strengthen collection procedures on NFA claims against the Fidelity Insurance Fund.
 This covers the policies in identifying bondable NFA officials and employees, determining their
accountabilities computation of the amount of fidelity bond, bonding process, cancellation of
bonds, premium payments and effecting claims against the Fidelity Insurance Fund.

a. COA Journal Vol. I, 1981 pp: 253-260

b. Treasury Memo Circular NO. 1-71 "Updated Administrative Regulations Covering the
Fidelity Fund and Insurance of Government Officials and Employees".

c. Treasury Memo Circular No. 5-82

(1) Amending Section 3, Rule IV of Treasury Memo Circular No. 1-71

(2) Amending Section 1, Rule VI of Treasury Memo Circular No. 1-71

d. Treasury Memo Circular No. 6-87 "New Procures Governing the Insurance of Government
Officials and Employees with the Fidelity Insurance Fund"

e. COA Circular No. 85-156-B dated May 31, 1985 "Certificate of Settlement and Balances
Manual".

1. Necessity to Bond NFA Accountable Officials and Employees

NFA accountable officials and employees shall be bonded to ensure: (1) faithful performance
of all duties imposed by law upon them; (2) faithful accounting of all funds and public property
coming into their possession, custody or control thru appropriation, collection, transfer or
otherwise; (3) lawful payment, disbursement and expenditure or transfer of all such funds or
public property under their custody and control as accountable officers or employees.

2. Purpose of Fidelity Bond

The Fidelity Bond shall be for the purpose of replacing defalcations/shortages and for payment
of court fees incident to civil proceedings brought against the defaulting accountable officer to
recover sums paid by NFA on their account.

3. Bondable NFA Officials and Employees

 3.1 Regular NFA employees who are appointed or designated to the following accountable
positions and are actually performing the functions attached to these positions:

a. Warehouse Supervisor II
b. Cashiers
c. Sr. Disbursing Officers/Disbursing Officers
d. Supply Officers/Property Custodians
e. Other positions holding accountabilities (ex. regular employees designated to act as
special collecting or disbursing officers)

3.2 Plant Engineers, Sr. Mechanical Plant Operators and MPO's II shall be bonded as to
their accountabilities for stocks-in-process.

3.3 Bonding of NFA Central Office and Field Office Key Officials, either appointed or
designated to these positions, shall be undertaken only upon the discretion of COA
based on the officials needs to perform specific functions similar to those of the
identified accountable positions.

3.4 Casual employees who are to be bonded shall include only those designated as
Special Disbursing Officers for grains procurement operations in case of urgent need in
the exigency of the service as authorized by the Regional Director.

3.5 No bondable official/employee shall be allowed to hold accountabilities unless his bond
has been approved.

4. Appointment or Designation of NFA Accountable Officials and Employees

4.1 The head of office shall exercise utmost discretion in recommending the appointment or
designation of officials and employees to accountable positions. They shall see to it
that those appointed or designated to such accountable positions are unquestionable
conduct and character as well as of proven integrity.

4.2 Designation shall be made in any of the following circumstances

a. resignation or transfer of the incumbent accountable officer/employee to another

position without immediate replacement for that position.
b. no existing positions in the plantilla of the office/directorate but same are needed
for particular purposes.
c. leave of absence of the incumbent for at least two (2) months or indefinite leave
due to suspension for any criminal or administrative charge.

4.3 Designations to accountable positions shall be effected with the issuance of Special
Order by the Administrator or the Regional Director for Central Office and Field Office,
respectively. Request for Special Order shall be made at least one (1) month prior to
assumption to duty. Assumption to duty shall not be earlier than the approval of his
bond.
5. Cancellation of Fidelity Bonds

5.1 Fidelity Bonds shall be cancelled due to any of the following reasons:

a. retirement/resignation from service of the incumbent

b. separation for cause from the service
c. designation to non-accountable positions
d. change in position title thru promotion/demotion
e. termination of Special Order for specific project
f. relief from accountability (especially that resulting from the transfer of the
accountable officer to another region).

5.2 Cancellation of fidelity bonds of bonded officials/employees shall be immediately

effected when the accountable officers are relieved of their accountabilities.
Accountabilities shall be liquidated once the accountable officer ceases to act as one.
The head of office shall speedup the liquidation process to ensure prompt clearance of
the concerned official/employee.

5.3 The head of office shall see to it that officials and employees whose fidelity bonds have
been cancelled are relieved of their accountabilities.

6. Cash Responsibility and Amount of Bond

6.1 The schedule of bonds necessary to cover the accountability and responsibility of
accountable officers shall be as follows:

6.3 If an accountable officer/employee has both cash and property responsibilities, only
one bond is necessary to cover both accountabilities. However, the amount of the
bond shall be fixed at the total amount to be arrived at in accordance with the foregoing
schedule. The application shall reflect the individual accountability for cash and
property responsibility.

6.4 The cash and property responsibilities handled by an employee/officer shall not exceed
the amount of bond covering the accountabilities. Whenever the amount of the bond is
exceeded, the accountable officer as well as his immediate supervisor shall take
immediate and necessary actions to have the excess transferred from his possession.

6.5 Grains stocks and empty sacks shall be classified under property accountability.
Computation shall follow the formula used for supplies and materials.

7. Premiums

7.1 The premium chargeable for insurance in the Fidelity Fund shall be at the rate of 1/2 of
1 per centum per annum payable semi-annually in advance on the first day of January
and July of each year.
 Computation of the annual premiums shall be as follows:

Example : Amount of Bond = P10,000

Premium Payable per Year = 1/2 (.01 x P10,000)

= P50.00

Premium Payable per Semester = 1/4 (.01 x P10,000)

= P25.00

7.2 All premiums on bonds shall be paid for a full semester, regardless of the date of
effectivity and cancellation of the bond during semester.

7.3 No rebate or refund of premiums paid shall be made from the Fidelity Fund for any
cause whatsoever. However, in case there has been an overpayment, the Bureau of
Treasury (BTR) shall be informed in writing in order that credit will be given in the
succeeding bill (Section 10, Rule VI of BTR Memorandum Circular No. 1-71).

7.4 Payment of premiums shall be authorized by the Assistant Administrator for Corporate
Administration/Regional Director.

8. Amount of Accountability

The amount of accountability shall be determined by the head of office on the following:

Accountable
Officer/Employee Accountability

a. Supply Officer/ - Total value of all supplies/materials and

Property Custodian accountable forms under accountability.
This shall be based on the average monthly
inventory level during the last year computed
based on the book value of supplies/
materials.

b. Warehouse - Total value of stocks based on the average

Supervisor II monthly balance of the warehouse of the
previous year. If the WS II handles more than
one warehouse, the total shall be determined
for all warehouses handled. Costing shall be
based on the book value of stocks.

c. Cashier/Sr. Disbursing - Total cash accountability.

Officer/Special Collecting
or Disbursing Officer
 d. Plant Engineer/ - Based on the average weekly balance of the
Sr. MPO/MPO II previous year of stocks in process at the
Ricemill/Drier/Silo being handled (refer to
SOP No. GM-PG-01). Costing of stocks shall
be based on book value.

9. Filing and Processing of Fidelity Bond Application

9.1 All bondable officials and employees shall be required to submit their Application for
Bond (General Form No. 58A - Exhibit 1) and Request for Bonding (General Form No.
57A - Exhibit 2) to the Administrative Officer/Assistant at least three (3) weeks prior to
holding of accountability.

The Administrative Officer/Assistant shall check the completeness of the forms and their
supporting documents which are as follows:

a. Certified xerox copy of the approved appointment;

b. Certified xerox of the designation to act as an accountable officer;
c. Latest Statement of Assets and Liabilities; and
d. Picture (2" x 2") per application form.

9.2 The request for bonding and application for bond shall be signed by:

Authorized Official Accountable Officer

a. Director of Head of Office concerned Central Office employee

b. Regional Director Regional Office employee
c. Provincial Manager Provincial Office employee

The Director for Treasury and Fund Management shall sign the "First Endorsement"
portion of the request for bonding of Central Office accountable officers and employees.

The Corporate Auditor/Regional or Provincial Auditor shall sign the "Second

Endorsement" portion of the request.

9.3 The determination of the amount of accountability and the recommended amount of
bond shall be the responsibility of the Chief of the Cash Division/Regional or Provincial
Accountant.

The amount of the bond shall be fixed by the COA resident auditor after verification and
processing of the forms.

9.4 The duly accomplished/processed forms with their supporting documents shall be filed
by the designated employee of the Cash Division/Regional or Provincial Administrative
Officer with the proper BTR office:
 a. Fidelity Bond Division, BTR : For Central Office and
Metro Manila Office
Accountable Officers

b. Treasury Fiscal Officer III or

I assigned in the Province (Annex A) : For field office accountable
officers

Follow - up of requests/applications shall be made by the same responsible employees.

9.5 Field Office request/applications shall be forwarded by the Treasury Fiscal Officer III/I to
the Treasury Regional Director for approval. Notice of the approval together with the
approved bond shall be transmitted to the NFA through the Treasury Fiscal Officer III/I.

Defective request/applications shall be returned for correction.

10. Bond Cancellation

10.1 For bond cancellation, only appropriate portions of the General Form No. 57(A) shall be
accomplished. No supporting documents are required. (Refer to Annex B for detailed
instructions).

10.2 The signatories to the bond cancellation request shall be same officials designated to
sign the request/applications for bonding.

10.3 Filing of bond cancellation request shall be made by the same NFA employees with the
same Treasury Officers provided in 9.4.

11. Copy Distribution of Forms

11.1 Application for Bonding (General Form No. 58A) shall be accomplished in four (4) copies
both for Central Office and field offices.

Copy 1-2 - Treasury Office concerned

3 - Cash Division/Regional or Provincial Administrative Section
4 - COA Resident Auditor

11.2 Request, for Bonding/Cancellation of Bonds (General Form No. 57A) shall be
accomplished in the following number of copies:

a. Central Office

Copy 1-4 - Fidelity Bond Division

5 - Corporate Auditor
 Copies 2 to 4 validated by the Fidelity Bond Division shall be returned to the NFA
and distributed as follows:

Copy 2 - Cash Division

3 - Central Office Accounting Division
4 - Directorate or Office of the bondable employee
(xerox copy may be provided the bondable employee)

b. Field Office

Copy 1-4 - Treasury Fiscal Officer III/I

5- Regional/Provincial Auditor

The Treasury Fiscal Officer III/I shall returned the validated request to the NFA to be
distributed as follows:

Copy 2 - Regional/Provincial Administrative Section

3 - Regional/Provincial Accounting Section
4 - Bondable employee.

11.3 The same division/section shall be provided with copies of the BTR Notice of Approval
of
the bond application./cancellation.

12. Adjustment of the Amount of Bond/Change of Incumbents

12.1 The existing amount of bond of the bonded officer employee shall be recommended
for adjustment in case there is a substantial increase/decrease in the total
accountability.

Request for such adjustment shall be made using Form 57A - Request for Bond
Application (no supporting documents required) indicating the updated amount of
accountability and bond. The remarks portion should clearly state Increase/Decrease
of accountability from ____________ to _________________. Hence, additional
billing by the Bureau of Treasury shall be based on the increment.

12.2 In case of change of incumbents and there is simultaneous bond application and
cancellation for reasons already specified (e.g. resignation and immediate
appointment/designation for the same accountable position) only one form (Form 57A)
shall be used for both request. The application portion shall be for the incoming
accountable officer and the cancellation portion for the outgoing accountable officer.
This shall require attachment of Application for Bond (Form 58A) for the incoming
accountable officer including all other documents specified in 9.1.

The remarks portion shall state change of incumbent hence, there shall be no
additional BTR building.
13. Financial Management

13.1 Since payment of the fidelity bond premium of field offices has been decentralized to
the regional office level, corresponding budget/allotment shall be provided to the
regional offices. The annual operating budget request of regional offices shall
include expenses for fidelity bond premiums for the region.

Payment shall be made at the BTR regional office (Annex A) by the Regional
Administrative Officer (RAO)

13.2 Central Office directorates/offices, with identified bondable positions shall be allotted
budget for the fidelity bond premiums based on submitted budget request. Budget for
premiums of the other directorates/offices shall initially be allotted to the DTFM.
Subsequent charging of the expenses to the concerned directorate/office shall be
effected once payment is made.

13.3 The Directorate for Treasury and Fund Management (DTFM) shall facilitate the
implementation of the BTR decentralization policies on the processing of
application/cancellation of fidelity bonds and payment of premiums.

13.4 Basis for the payment of the fidelity bond premiums shall be the Treasury Bill Form
No. 32 (Exhibit 3) supported by the Statement of Account (Exhibit 4). No payment
shall be made unless these documents are received by the NFA.

Prior to payment, the bill, statement of account and list of bonded accountable
officers shall be checked as to correctness of the list of bonded positions, amount of
bonds, names of the incumbents and the risk numbers. This shall be the
responsibility of the Cash Division/regional office administrative section as
coordinated with the Central Office Accounting Division/regional office accounting
section. The RAO shall check the data from the Report on Bonded
Officers/Employees and Bonds Cancelled submitted by the provincial offices.

13.5 Any discrepancy shall be first coordinated with the Bureau of Treasury,
Corrections/changes as presented to the BTR shall be made on all copies of the
statement of account and bill. The original copies shall be returned to the BTR
together with the check for the premiums.

The Cash Division/Administrative and accounting units/COA shall be provided with

copies of the Statement of Account and Treasury Bills.

13.6 Payment of the fidelity bond premiums shall be effected thru the usual disbursement
voucher system.
 Preparation of the disbursement vouchers and attachment of the required supporting
documents shall be the responsibility of the Cash Division/regional administrative
section.

13.7 The accounting entries to take-up payment of the fidelity bond premiums shall be as
follows:

Central Office:

DR: Other services - fidelity

Bond Premium xxx
CR: Vouchers Payable xxx
#

DR: Vouchers Payable xxx

CR: Cash in Bank xxx
#

Regional Office:

DR: Other Services - Fidelity

Bond Premiums * xxx
POA** xxx
CR: Vouchers Payable xxx
#

Provincial Office:

DR: Other Services - Fidelity

Bond Premiums xxx
CR: ROA xxx

* Premiums of Regional Office Accountable Officer

** Premiums of Provincial Office/Accountable Officer

The BTR official receipt shall be evidence receipt of the check representing payment
of the premiums.

14. Reporting/Records Management

14.1 The list of bonded officials/employees shall be maintained and updated by the
Cash Division/Administrative Section in order to determine additions/deletions
in the list and needs to increase existing bonds based on special orders,
request for application/cancellation/adjustment of bonds, memoranda and other
 management instructions. The Cash Division/Administrative Section shall be
furnished with copies of management instructions involving bonding policies.

14.2 A Report on Bonded Officers/Employees and Bonds Cancelled (Exhibit 5) shall

be certified by the Provincial Administrative Officer (PAO). The report noted by
the Provincial Manager shall be submitted to the RAO on or before June 22 and
December 22 of each year. This shall be used by the RAO in checking the
correctness of the BTR bill.

The PAO shall inform the RAO of any changes in the report prior to the
premiums payment (January 1 and July 1 of each year).

14.3 A consolidated report noted by the Regional Director shall be submitted to

DTFM and HRMD not later than January 7 and July l7 of each year.

14.4 The Cash Division/Administration Section shall maintain index cards (Exhibit 6)
which shall be prepared per individual accountable officer. Same shall be
updated based on incoming approved request for bond/cancellation. This shall
be reconciled with the BTR statement of account.

15. Failure to File/Cancel Fidelity Bond

15.1 The Provincial Manager/Regional Director/Head of Office shall ensure that

proper filing of application/cancellation of bonds is effected.

15.2 In case of failure to comply with the herein bonding policies, the responsible
officials/employees shall be made liable for any losses or expenses that maybe
incurred by the NFA on account of such failure without prejudice to any
administrative actions that may be taken against them.

16. Claims Against the Fidelity Insurance Fund

16.1 Claims against the fidelity bonds shall be filed only after all possible means to
recover the amount of loss from responsible bondable officer have been
declared by competent authority. (Section 3, Rule VII, TMC NO. 1-71).

16.2 Claims against the fund shall not be allowed when a bonded officer has been
found short in his accountability and was not removed or relieved of the duties
thus giving him another opportunity to embezzle, which he did and because the
subject of the claim. (Section 5, Rule VII, TMC No. 1-71).

Defaulting accountable officers shall be relieved of their duties as such by the

head of office concerned upon recommendation of COA/IAD/other authorized
representatives who conducted the examination of accountabilities.
 16.3 Proceeds of claims from the fund may be applied for the payment and/or
settlement of unpaid bond premiums of the NFA. (Section 6, Rule VII, TMC 1-
17).

16.4 COA shall notify in advance the BTR regarding defaulting officers even before
actual loss has been established.

16.5 Based on the findings and recommendation of COA/IAD/other authorized

examiners, the Directorate for Enforcement and Investigation (DEI) provincial
investigators shall conduct the investigations and recommend filling of cases.
The Directorate for Legal Affairs (DLA/Senior Legal Officer shall institute legal
proceedings against defaulting officers.

16.6 The DLA shall inform the DTFM regarding the status of court cases for
purposes of effecting claims from the Fidelity Fund, i.e. court decisions,
whereabouts of defaulting officers no longer known, declaration of insolvency,
etc....

16.7 The DLA furnishes the DTFM with the following documents to support claims
from the Fidelity Fund:

a. Court Decision
b. Declaration of Insolvency
c. Certification from the court having jurisdiction over the case that
whereabouts of the respondent can not be established.
d. Certification from the Registry of Deeds in the place of residence
of the bonded employee that there are not properties registered
under his name.

The Senior Legal Officer shall submit copies of these documents to the DTFM
thru the DLA.

16.8 The DTFM shall forward all documents required for the claims directly to the
Chairman of the Commission on Audit for recommendation. Approval of the
claim in full or in part shall be made by the Secretary of Finance based on COA
recommendation.

The BTR shall effect payment based on the authorization of the Secretary of
Finance.

Status of cases filed in the field offices shall be reported to the DLA.

1. Bondable NFA Officer/Employee

 1.1 Accomplishes General Form 58 (A) to apply for fidelity bond and General Form 57 A
(Request for bonding and/or Cancellation of Bond)/Prepares required supporting
documents.
1.2 Submits the accomplishes forms to the respective Administrative Officer/Assistant
(AO/AA) together with all the required documents.

2. Head of Office

2.1 Recommends designation and appointment of accountable personnel/Request for

Special Order from the Administrator or Regional Director.
2.2 Determines the total amount of accountability and bond requirement.
2.3 Signs Request for Bond and/or Cancellation of Bond of Accountable Officer/Employee.
2.4 Recommends to DEI investigation of defaulting bonded employees under his
jurisdiction.
2.5 Notes Report on Bonded Officers/Employees and Bonds Cancelled.
2.6 Ensures compliance to the herein policies relative to bond application/cancellation,
payment of premiums and effecting claims against the Fidelity Insurance Fund.

3. Administrative Officer/Assistant

3.1 Identifies all bondable officials/employees of the branch/office.

3.2 Determines the completeness of the application forms and the supporting documents
submitted by the applicant.
3.3 Secures First Endorsement and Second Endorsement of the bond request.
3.4 Forwards documents to the Cash Division for transmittal to the Bureau of Treasury (C.O.)
and to Treasury Fiscal Officer III/I (F.O.)/Follow-up status of request for bond
application/cancellation.

3.5 For Provincial Administrative Officer:

Submits Report on Bonded Officers and Employees noted by the Provincial Manager to
the Regional Office on or before June 22 and December 22 of each year.

For Regional Administrative Officer:

Submits a Consolidated Report on Bonded Officers and Employees to DTFM and HRMD
not later than January 7 and July 7 of each year.

3.6 For Regional Administrative Officers:

Reviews BTR Statement of Accounts/Reconciles the BTR bill against index card and list
maintained/Coordinates any discrepancy with the Treasury Fiscal Officer III or I/Effects
necessary amendments to correct bill/Prepares disbursement voucher for payment of
premiums.

4. Provincial/Regional Accountant
 Evaluates all bond applications forwarded by the Administrative Officer/Assistant as to the
correctness of accountabilities and amount of bond.

5. Chief, Cash Division

5.1 Secures First and Second Endorsement of Central Office bond request.
5.2 Reviews all request for bond application/cancellation submitted prior to endorsement to
BTR/Monitors the status of request with the BTR.
5.3 Informs concerned office regarding approved request for bond application/cancellation.
5.4 Maintains index cards of Central Office bonded personnel/At the end to the semester,
prepares Master List of bonded personnel based on updated index cards.
5.5 Reviews Statement of Accounts submitted by the BTR and reconciles same with the
Master List/Coordinates any discrepancy with the BTR.
5.6 Prepares Central Office voucher for the payment of Fidelity Bond premiums based on
the corrected statement of accounts.
5.7 Files claims against the Fidelity Insurance Fund/Monitors status of claims.
5.8 Ensures compliance to the herein policies.

6. Director for Treasury and Fund Management

6.1 Signs on the First Endorsement portion of Central Office request for bond applications/
cancellation.

7. Director for Enforcement and Investigation/Provincial Investigator

7.1 Initiates investigations and recommends filing of cases against defaulting bonded
officials/employees.

8. Director for Legal Affair/Sr. Legal Officer

8.1 Institute legal proceedings.

8.2 Informs the DTFM regarding status of court cases against defaulting offices and
coordinates with the DTFM for purposes of effecting claims against the Fidelity
Fund/Furnishes the DTFM with copies of findings, examinations, court decision, and
other documents required for filling of claims.

9. Regional/Provincial Auditor

9.1 Evaluates and processes request for bond application and cancellation/Determines the
amount of bond of every bondable officer or employee.

9.2 Signs under the Second Endorsement portion of the bond request to signify that same
has been verified and processed.

10. Corporate Auditor

10.1 Signs the "Second Endorsement" portion of the C.O. request for bond
application/cancellation after processing and verification.

10.2 Recommends approval of the NFA claims against fidelity bonds of defaulting bonded
officers/employees to the Secretary of Finance thru COA Commission Proper.