CSD Pool Update

Ask the Experts: Fraud and Embezzlement

Do we have enough coverage for fraud and embezzlement?

Possibly. We offer coverage limits from $5,000 to $5 million. Approximately 76% of districts that purchase Crime coverage only buy the minimum. While $5,000 may seem sufficient, you don’t need a lot of imagination to think of a scenario in which you’d find yourself grossly underinsured. So unless you are the one district that buys the maximum, we can certainly increase your limit.

Theft can happen anywhere. No one expects that their coworker would steal money, but it happens all the time. Serious embezzlement claims often can ruin your district’s reputation, resulting in the loss of trust of your community. When taxpayer money is at stake, you want to ensure your district has coverage to recoup stolen funds right away.

In 2014, it was discovered that the manager of a metropolitan district had embezzled over $800,000 between 2007 and 2013. Though the court convicted the manager for his crime, the district and its residents were still on the hook for the massive amount of debt accrued. While this type of event may be uncommon, you don’t want it to occur on your watch.

In its 2018 Report to the Nations, the Association of Certified Fraud Examiners detailed how organizations with less than 100 employees experienced the greatest percentage of fraud cases in its global study, with a median loss of $200,000. Larger organizations often come equipped with better anti-fraud controls. Smaller organizations may not have the resources to prevent and recover from fraud.

If your district currently does not have Crime coverage with the Pool, we can provide information and proposals at any time. If your district already has coverage, we recommend that you evaluate whether your current limits would be sufficient in the event of a claim. The chart at right will help you compare your limit with your peers by headcount.

More than Just Surety Bonds

Many districts purchase Crime coverage from the Pool to meet their surety bond requirements for board members. This coverage fulfills the state’s blanket surety and corporate fidelity bond requirements. But there’s a lot more to this coverage than just bond requirements The Pool’s coverage includes:

  • Forged checks
  • Money that is stolen from your district or while being transported to or from your district
  • Money fraudulently transferred to an outside party using a computer
  • Forged use of credit or debit cards in the district’s name
  • Money orders that are never paid or paid with counterfeit money
  • Money that is transferred as the result of a fraudulent interaction with someone posing as a district employee or official, often called Spear Phishing or Social Engineering

ERISA Requirement

If your district has an employee retirement plan that is required to comply with federal ERISA standards, you should review your Crime limit to make sure you are in compliance.

Federal law requires 10% of the total amount in the retirement fund be insured, meaning that your Crime limit should be at least that amount. If your district has an ERISA plan that is not specifically named on your Crime coverage with the Pool, contact us to get it added.

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