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006.09.1 R2-19-4-2004. Recoveries of Losses Discovered by an Audit

AR ADC 006.09.1 R2-19-4-2004Arkansas Administrative Code

West's Arkansas Administrative Code
Title 006. Department of Finance and Administration
Division 09. Office of Accounting
Rule 1. Rules and Regulations of the Financial Management Guide
Ark. Admin. Code 006.09.1 R2-19-4-2004
006.09.1 R2-19-4-2004. Recoveries of Losses Discovered by an Audit
Notice and Proof of Losses - Investigations - Restitution
The DLA, with the approval of the Legislative Joint Auditing Committee, will give notice and proof of loss to the Governmental Bonding Board on fidelity bonds. This is done when the audit report reflects apparent unauthorized disbursements or unaccounted-for funds or property for which the public official, officer or employee may be liable. (ACA 21-2-708) The DLA may request the appropriate prosecuting attorney or the AG to assist the State or the appropriate political subdivision in obtaining restitution when the audit report reflects apparent unauthorized disbursements or unaccounted-for funds or property for which the public official, officer or employee may be liable.
The Self-Insured Fidelity Bond Program and the participating governmental entity are considered victims. Restitution may be awarded to the participating governmental entity for the entire amount of its non-reimbursed losses and to the Self-Insured Fidelity Bond Program for the entire amount of its payment to the participating governmental entity in the event that any criminal prosecution against the official or employee causing the loss where such official or employee enters a plea of guilty or nolo contendere or where such official or employee is found guilty following a trial.
Disposition of Bond Proceeds
When the Board receives proof of loss from the DLA, the Governmental Bonding Board will determine whether the loss is covered under the Fidelity Bond Program. (ACA 21-2-709)
When determined that the loss is covered under the Fidelity Bond Program, the Insurance Commissioner will authorize fidelity bond loss payments from the fund to the participating governmental entity on a timely basis.
All disbursing documents for bond claim payments must include as supporting documents:
1. A copy of the payment recommendation by the State Risk Manager.
2. A copy of the proof of loss from the DLA.
Any loss payment may be adjusted by any applicable deductibles, restitution payments or co-insurance payments.
When a loss payment is made from the Fidelity Bond Fund, all rights and claims that the recipients of the loss payment may have against the official, officer or employee involved will be assigned to the Fidelity Bond Fund.
The Insurance Commissioner must timely notify the DLA and the agency when the Board determines that the loss is, or is not, covered under the Fidelity Bond Program.
An asset that is no longer in possession of the agency must be removed from the agencies books. The agency must notify the Department of Finance and Administration-Office of Accounting (DFA-OA) using P3-19-4-1503, “Credit for State Property” Form that the asset needs to be removed from the asset listing. The agency must give a full description of the lost asset. Once approval to remove the asset has been given, the agency must remove the asset and retain the correspondence for an audit trail. If Fidelity Bond proceeds are received for the reimbursement of a loss of personal property, the proceeds should be deposited into the Treasury using the agency's normal process for recording cash receipts. The proceeds should be recorded as Insurance Settlement/Restitution in GL 6092000000. If the asset is to be replaced, the agency should request an increase in appropriation from DFA-OA-FM for the purchase of the replacement. If in the current year an agency has been reimbursed for the loss and the property has been replaced, the increase in appropriation is accomplished with a refund to expenditure by the DFA-OA. The agency must provide proof of the deposit and a copy of the invoice that replaced the property in order to have the appropriation restored. If the agency is reimbursed for a prior year loss, the agency should request an increase in appropriation from DFA-OA-FM. The agency must provide proof of the deposit and a copy of the invoice that replaced the property in order to have the appropriation restored.
Refer to P1-9-4-2004 for sample journal entries to record restitution and Fidelity Bond Insurance payments.
Fidelity Bond Premiums
The Risk Management Division of the Insurance Department works with each agency to determine the number of employees to be bonded each year. The flat rate is applied to that number, and DFA-Administrative Services receives the information and sends it to DFA-OA-Funds Group.
The DFA-OA-Funds Group compiles the information on a per fund basis for the agencies. The Funds Group Manager sends the proposed funds and transfer amounts to those agencies that want specific cost centers or funds to be charged. The Funds Group changes the spreadsheet and transfers the funds to the various funds from which Administrative Services will issue the disbursements for the Bond Premiums. This transfer is usually done in December of each fiscal year. (A.C.A 21-2-710)
Current with amendments received through January 15, 2024. Some sections may be more current, see credit for details.
Ark. Admin. Code 006.09.1 R2-19-4-2004, AR ADC 006.09.1 R2-19-4-2004
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