Crime Coverage: Are My Limits High Enough?

Crime coverage limits should be sufficient to cover the potential loss of money and/or securities due to the actions of employees or third parties. These types of claims include employee theft (embezzlement), fraudulent transactions (employee misused a credit card by purchasing personal items), fraudulent impersonation (imposter requesting a fraudulent payment or transfer) and social engineering schemes (employee falling victim to someone impersonating a vendor or executive).

The Pool’s Crime form includes coverage for the types of losses mentioned above, as well as coverage that meets the State of Colorado’s bond requirements for board members. The State sets a minimum requirement, but your district’s board may elect to carry a higher amount of coverage.

Evaluating Your Risk

Take a moment to do a quick assessment of your risk and review your safeguards. Thinking about things from a different perspective can be an effective way of doing that. Ask yourself or your team some of these questions:

  • How much petty cash does the district have on premises? Recognize that any petty cash is at risk of theft.
  • Does the district provide credit cards to employees? How are you monitoring their usage? Think about whether the controls on those accounts are adequate to ensure all purchases are appropriate.
  • Do you have a strong separation of duties policy? Does only one employee handle all financial transactions? How can you divide these duties to ensure proper oversight? It is best to have more than one person oversee every transaction. Divide duties so no one person has total control over any transaction.
  • Do you require verification of wire transfers by multiple forms of contact? It is best to require a minimum of two — such as email, phone call, fax, or in-person request.
  • Do you offer anti-fraud training to employees who handle money? Do you offer anti-phishing training?

As the leader of a public entity, ensuring the security of public funds is your duty. Utilizing the techniques mentioned above can help manage your risk of loss. They can also discourage employees from stealing. However, these controls can fall short and leave you vulnerable. Having the right Crime coverage limit will give you added protection so you can sleep at night.

Is an Increase in Limits Right for You?

Since limits are not one-size-fits-all, your needs are going to differ from those of other members. Currently, approximately 90 percent of Pool members purchase Crime coverage. Even so, an overwhelming majority buy only enough to satisfy the statutory bond requirement. Of the districts that purchase higher amounts, fewer than ten percent have limits over $100,000.
In 2022, the Association of Certified Fraud Examiners reported that 25% of organizations affected by fraud are local government entities. The median loss was $125,000. Ask yourself whether your district can afford to lose that much of its budget.

Our basic Crime limit is $5,000 but you can purchase limits up to $5 million, subject to underwriting approval. The contribution is determined by several factors, including your current employee count. Consider an increase to the basic limit to provide your district with some added protection. Making an informed decision about the right limit will not just protect your district’s assets, it will also safeguard the public’s trust in you.

With renewal in full swing, you can easily request options for increased limits, so if you elect to make a change it will be in effect for your next coverage period.

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