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Directive:

DINAP BULLETIN 87-28


Status: Cancelled

Subject:
Using the Federal Bonding Program (FBP)

Purpose:
To transmit information on how Job Training Partnership Act (JTPA) officials may use the FBP's services.

To

All Native American Grantees

From

HERBERT FELLMAN PAUL A. MAYRAND Chief Director Division of Indian and Native Office of Special Targeted American Programs Programs

Date

February 22, 1988

Expiration Date

Ongoing.

Rescissions:    None.
Text :
Background. The FBP originated as a Department of Labor (DOL) pilot project in 1966. It was created when it became apparent that a significant number of persons participating in Federally financed training, counseling, work-training, or work-experience programs could not move into the job market because they could not qualify for fidelity bond coverage. A fidelity bond is insurance an employer carries as protection against employee theft or dishonesty. Employees who handle money or valuable tools or goods are frequently required to be bonded. Insurance companies routinely refuse to cover individuals with a record of arrest, conviction, probation, imprisonment, parole, drug or alcohol abuse, or poor credit. The pilot project provided coverage to eligible job seekers through an insurance company, the Aetna Casualty and Security Company, which issued bonds for these high-risk potential employees. In 1971, no longer a pilot project, the FBP was expanded and made available through local Public Employment Service offices throughout the U.S. Under the FBP, more than 21,000 persons have been successfully placed in jobs they could not have obtained without fidelity bonding; and the "default rate," that is, the percentage of participants who have claims paid against them, has remained constant at less than 2%--fewer than 1 bondee in 50. Key Features of the FBP. The FBP provides individual fidelity bond coverage for ex-offenders; persons with a history of drug or alcohol abuse; persons with poor or no credit history; veterans with dishonorable discharges; persons who have been bankrupt; and other high-risk job applicants normally ineligible for fidelity bonding. Eligibility. Bonds are available to any individual who is qualified for a specific job and is not commercially bondable; who has a firm job offer of fulltime, steady work, with a reasonable expectation of permanence, and is not self-employed. Amount of Bonds. Bonds are available in increments of $500 up to a maximum, in most cases, of $10,000. In specific cases, coverage can be obtained up to $25,000. Most bonds are written for amounts in the $1,000--$8,000 range. The bond must be "tailored" to fit only the actual amount of risk (the amount of cash, merchandise, or equipment the employee can access) on the job. Bonds above $10,000 must be authorized individually by the FBP National Coordinator before they are issued. (This can be done by phone). Administration. Either the job applicant or the potential employer may apply for the bond at any local Public Employment Service office. If the applicant and the job meet the eligibility criteria, the authorized local office staff will certify the bond. The bond will become effective on the day the applicant begins work. The bond itself will be mailed to the employer by the McLaughlin Company, which acts as agent for the Aetna Casualty & Surety Company, that contracts with DOL to insure the bond. Length of Coverage. The bond is issued for six months. The employer may extend the coverage for another six months by writing to the FBP in Washington, D.C., one month prior to the expiration date to request a renewal. At the end of the 12 months, if there has been no claim against the bond, Aetna will sell coverage to the employer or bondee at regular rates. Cost of the Bonds. The FBP covers the total bonding costs for 12 months. After that, the premium must be paid either by the employer or the bondee. Bond rates will vary depending on the amount of risk to the employer and type of business. How JTPA Officials Can Use the FBP. Since 1966, the FBP has been administered through local Public Employment Service offices. Recently, however, a number of JTPA staff have indicated an interest in having more direct access to the program. This can be done in two ways: a. Public Employment Service Access. JTPA staff contact the local Public Employment Service office and work closely with them--by phone or in person--to provide the information needed for bond certification. The local office staff will handle the paperwork and certify the bond by letter to the employer the same day. When the certification request (application) is received by the McLaughlin Company in Washington, D.C., the bond will be mailed to the employer. b. JTPA FBP Designated Authorized Representative (DAR). In addition to working through Public Employment Service offices, JTPA personnel can be authorized to act as representatives of the FBP. After training provided by the FBP National Coordinator, JTPA staff would complete the certification request themselves and send it directly to the McLaughlin Company in Washington, D.C., issue a letter certifying the bond to the potential employer, and forward a copy of the certification request to the State Coordinator for the FBP. As above, the McLaughlin Company will mail the bond to the employer. How to Get Involved. JTPA personnel interested in becoming DARs should write for full information on the program to: Mr. Bill Throckmorton National Coordinator or Ms. Trudy Brisendine, Assistant National Coordinator The Federal Bonding Program 2000 L Street, N.W., Suite 803 Washington, D.C. 20036 Telephone: (202) 293-5566 Questions. Consult your DINAP Federal Representative.

Attachments :
Federal Program Bonds Ex-Cons. For a copy of the attachment, please contact Brenda Tollerson at (202) 219-8502.




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