A PROPOSAL BY THE SECRETARY OF THE TREASURY HOUSE OF REPRESENTATIVES APRIL 7, 1971 Prepared for the use of the Committee on Post Office and Civil Service 59-002 O U.S. GOVERNMENT PRINTING OFFICE WASHINGTON: 1971 PURCHASED THROUGH FOREWORD This print contains (1) the letter of transmittal of the Secretary of the Treasury proposing legislation to provide that the Federal Government shall assume the risks of its fidelity losses; (2) a draft of the proposed legislation; and (3) the report of operations in connection with the bonding of Government officers and employees required under the act of August 9, 1955, for the fiscal year ending June 30, 1970. (III) DEAR MR. SPEAKER: There is transmitted herewith a draft of proposed legislation, to provide that the Federal Government shall assume the risks of its fidelity losses. The proposed legislation would repeal the statutory requirements for bonding Federal civilian employees and military personnel charged with accountability for public funds or public property, and establish a self-insurance program for the Government's fidelity losses by permitting agencies to charge their appropriations for such losses. Enactment of the legislation would result in savings to the Government since bond premiums have consistently exceeded amounts recovered from surety companies. The proposal is also consistent with the Government's general policy of assuming its own insurable risks-a policy stemming from the fact that the Government has the resources to assume such risks. In the financial area, the risks are minimal because of extensive systems of financial checks and balances that limit the opportunities for fraud or negligence in the handling of Government funds. Under Public Law 323, 84th Congress (6 U.S.C. 14), the head of each department and establishment in the executive branch is authorized to procure a bond at Government expense to cover military and civilian personnel of his department who are required by law or administrative regulation to be bonded. Prior to enactment of this law these individuals were required to pay their own fidelity bond premiums. During fiscal year 1955, the last full fiscal year prior to enactment of Public Law 323, the amount of the bond premiums paid by Federal employees was $1,732,748. Although the foregoing statute eliminated this inequity, experience under the law in procuring blanket and position schedule bonds to cover large groups of employees has focused attention on the practical and economical aspects of the requirements for bond coverage. These experience factors can be highlighted from the consolidated annual reports to the Congress on agency fidelity bonding activities which the above act required of the Secretary of the Treasury. The most recent report, covering the fiscal year 1970, showed that as of June 30, 1970, there were 963,269 employees covered by fidelity bonds; the total computed annual cost of premiums of bonds in effect on that date was $425,753. For the 141⁄2 fiscal years that the Government has borne the expense of the bond premiums, the premiums have exceeded claims filed by $1,188,263. The Comptroller General, in a report to the Congress in December 1964 (B-8201) recommending discontinuance of the bonding of Federal employees, estimated that annual savings of |