Section 1.406 - Fidelity Bond Requirements The Department is required to assure that fiscal control and accounting procedures for federally funded entities will be established to assure the proper disbursal and accounting for the federal funds paid to the state. In compliance with that assurance the Department requires program Subrecipients to maintain adequate fidelity bond coverage. A fidelity bond is a bond indemnifying the Subrecipient against losses resulting from the fraud or lack of integrity, honesty or fidelity of one or more of its employees, officers, or other persons holding a position of trust.
(1) In administering Contracts, Subrecipients shall observe their regular requirements and practices with respect to bonding and insurance. In addition, the Department may impose bonding and insurance requirements by Contract.(2) If a Subrecipient is a non-governmental organization, the Department requires an adequate fidelity bond. If the amount of the fidelity bond is not prescribed in the contract, the fidelity bond must be for a minimum of 5% of the Contract amount. The bond must be obtained from a company holding a certificate of authority to issue such bonds in the State of Texas.(3) The fidelity bond coverage must include all persons authorized to sign or counter-sign checks or to disburse sizable amounts of cash. Persons who handle only petty cash (amounts of less than $250) need not be bonded, nor is it necessary to bond officials who are authorized to sign payment vouchers, but are not authorized to sign or counter-sign checks or to disburse cash.(4) The Subrecipient must receive an assurance letter from the bonding company or agency stating the type of bond, the amount and period of coverage, the positions covered, and the annual cost of the bond. Compliance must be continuously maintained thereafter. A copy of the actual policy shall remain on file with the Subrecipient and shall be subject to monitoring by the Department.(5) Subrecipients are responsible for filing claims against the fidelity bond when a covered loss is discovered.(6) The Department may take any one or more of the actions described in Chapter 2, of this title, relating to Enforcement in association with issues identified as part of filing claims against the fidelity bond.10 Tex. Admin. Code § 1.406
Adopted by Texas Register, Volume 41, Number 48, November 25, 2016, TexReg 9266, eff. 12/4/2016; Amended by Texas Register, Volume 41, Number 50, December 9, 2016, TexReg 9699, eff. 12/4/2016; Adopted by Texas Register, Volume 49, Number 38, September 20, 2024, TexReg 7634, eff. 9/26/2024