What is a Public Official Bond?
A Public Official Bond is a type of surety bond that serves as a statutory obligation requiring faithful performance, fidelity, and integrity of a public official’s duties to the public.
The bond requires public officers and secondary obligors to pay a fixed amount if they do not faithfully perform their duties in the office. Like all surety bonds, this bond consists of a three-party agreement:
- Principal – Public official
- Obligee – Government or public being served by the official
- Surety – Bonding company that underwrites the bond and is the secondary obligor
This bond is one of the oldest forms of written guarantee that requires persons to obtain to qualify for office. In 1792, the Congress passed an act that the Office of the Paymaster “shall give bond in the sum of $20,000, with two sufficient sureties, for the faithful discharge of duties.”
Depending on the statutes of a specific jurisdiction, Public Official Bonds may be faithful performance bonds, fidelity bonds, public employee dishonesty bonds or public employee blanket bonds.
What are the general requirements of a Public Official Bond?
The bond requirements are found in the individual state codes. They are mandatory for all elected and most public officials, ranging from governors and mayors to local school board members and agents selling fishing or hunting licenses. They are effective before and once a public official has taken the oath of office.
The bond protects against:
Conduct or omissions made by public officials that constitute a breach of his or her duties of the office. The bond serves as a guarantee against fraud or dishonesty and covers losses arising from neglect or other serious offenses.
The bond protects:
Any government entity and provides coverage to the public. The bond, in nature, is an Indemnity Bond rather than a Forfeiture Bond. It is a contract designed to protect the city or the entire citizenship served by the public official.
The bond indemnifies those parties that have suffered losses as a result of the official’s misconduct. In some cases, state statutes will allow a member of the public to file a suit against the bond, it that individual has suffered financial damages caused by a public official’s misconduct.
What are the two common types of Public Official Bonds?
Public Official Bonds may serve different functions: Fidelity Bonds and Faithful Performance Bonds. Also, states use “fidelity bond” and “faithful performance” interchangeably, there is a difference between fidelity coverage and faithful performance coverage.
A Fidelity Bond intends to ensure honesty, where a party agrees to indemnify another party against a loss resulting from dishonest actions or misconduct by a person holding a position of trust.
Simply put, a Fidelity Bond, while also covers the faithful performance of duties of an official, seeks to indemnify financial losses due to neglect or violations of faithful performance of duties.
Faithful Performance Bond
The Faithful Performance Bond ensures the faithful performance of an official’s duties and provides a wide range of coverage from lapses in fidelity through ordinary negligence.
Some statutes request a bond conditioned on the “faithful performance of his or her duties” but includes further provisions indicating “faithfully to account for all moneys coming into their hands.”
For example, in Iowa, the bond required for public officials states:
“That as (name of office), in (city, county or state of Iowa), the officer will render a true account of the office and of the officer’s doings therein to the proper authority, when required thereby or by law; that the officer will promptly pay over to the officer or person entitled thereto all moneys which may come into the officer’s hands by virtue of the office, that the officer will promptly account for all balances of money remaining in the officer’s hands at the termination of the office…”
Also, public officials are held liable for the acts of their deputies and subordinates, and their bonds generally extend to the faithful performance of their deputies and subordinates.
To eliminate additional risk and exposure, governments and agencies require deputies and subordinates to procure surety bonds of their own to the public official or to be covered under a public employees blanket bond or public employees dishonesty bond in amounts sufficient to mitigate potential risks.
Who needs a Public Official Bond?
Public Official bonds cover town, city or municipal governments, state government agencies, city and state courts, and community and state colleges.
There are specific public official bond categories that cater to these groups of public officials, clerks, and agents, namely:
- Mayors and Judges
- Sheriffs or Deputies
- Court Clerks and Officers of Courts
- Treasurers, Assistant Treasurer, and subordinates
- Town Clerks or other Town Officials
- Tax Collectors, Deputy Tax Collectors, and subordinates
- Agents Selling Hunting and Fishing Licenses
How much does a Public Official Bond cost?
The state or city government usually pays for its own protection, however, bonded public officials have to pay up the Surety if a claim is made against their bond.
The Surety will financially back up the public official and pay the state if it garnered proof that the financial damages are caused by the bonded public official’s misconduct. The official will then reimburse the Surety with the full amount paid out.
The bond cost, which is the percentage of the bond amount (usually 1%-5%), varies from state to state and will be based on the role of the public official and the risks linked to it.
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How long does a Public Official Bond remain valid?
As the bond lacks statute provisions limiting the discovery period for a default or violation under a public official bond, the bond language itself will control any discovery limitations. Discovery means the discovery of fraud or other violations made by public officials that impede their capability to perform their supposed duties.
Public entities are also obligated to take action to discover and thwart the continuation of dishonesty or misconduct by the bonded public officials or employees. These bonds are subject to limitations or expansions contained the statutes that governed them.
How do I obtain a Public Official Bond?
Choose a surety bond company that specializes in this type of surety bond. The Surety must have experience writing surety bonds at federal, state, and municipality levels and fully understand the conditions and complexities of Public Official Bonds.
There are several factors to consider when underwriting public official submissions:
- The nature, role or position of the duties which the public official is required to perform
- The qualifications of the public official
- The personal and financial background of the public official
Certified and licensed surety underwriters will conduct comprehensive reviews and evaluation of the public official’s bonding capacity.
Several documents will be required to qualify:
- Completed bond application
- Bond form (a copy can be obtained from the State or regulation department)
- Financial documents
- Other requirements as needed (evidence of the qualifications, personal background, position of the elected official or employee)