Position Fidelity Scheduled Bond - MAIL Bond - USDA in All States
Table of Contents
Brief Summary
If your water district, community facility or nonprofit borrower is closing an USDA Rural Development loan, the fidelity bond has to be in place by loan closing or the start of construction, whichever comes first. A position schedule bond covers the treasurer, clerk and anyone else who handles the money, and it is written by a Treasury listed surety as Rural Development requires.
The Position Fidelity Schedule Bond, Form RD 440-24, is the fidelity bond USDA Rural Development accepts from loan applicants and borrowers to cover every person who has access to their funds. Under 7 CFR 1942.17(j)(3), coverage normally approximates the borrower's total annual debt service on its Rural Development loans and must be kept in force for the life of the loan. Other forms are allowed if Rural Development finds them acceptable.
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How to Apply for a Position Fidelity Scheduled Bond - MAIL Bond:
- Get the required coverage amount and positions from your Rural Development letter of conditions or loan official.
- List each position that handles funds, such as treasurer, clerk or bookkeeper, with its coverage amount.
- Have a Treasury listed surety issue the bond on Form RD 440-24 or another form Rural Development accepts.
- Deliver evidence of coverage to Rural Development by loan closing or start of construction, whichever is first.
- Renew coverage each term and report it to Rural Development for the life of the loan.
Detailed Information About the All States Position Fidelity Scheduled Bond - MAIL Bond:
Who needs this bond
This is a borrower bond, not a license bond. Public bodies and nonprofits that borrow from USDA Rural Development, such as community facility and water or waste borrowers financed under 7 CFR 1942 subpart A, must provide fidelity bond coverage for all persons who have access to funds. Coverage can be written position by position or as blanket coverage for all appropriate employees and officials. Form RD 440-24 is the Rural Development position schedule version, which lists each covered position and the amount of coverage for it.
Rural Development's rural housing site loan rules at 7 CFR 1822.267(k) carry a similar requirement. There the bond covers officers and employees who receive, hold or disburse funds or hold readily saleable property, and the United States is named as coobligee where state law allows.
How much coverage
There is no single flat amount. For community facility type loans, 7 CFR 1942.17(j)(3)(ii)(A) says the coverage Rural Development requires will normally approximate the total annual debt service on the Rural Development loans. Under 7 CFR 1822.267(k)(2), the bond must be at least equal to the most money and saleable property the applicant will hold at any one time. Your loan approval official sets the figure in your letter of conditions.
Timing and who can write it
Evidence of the bond is due by loan closing or the start of construction, whichever comes first, and coverage must be maintained for the life of the loan. Borrowers report their coverage to Rural Development, often in year end reports, and must renew it themselves. Rural Development's monitoring does not take that duty off the borrower. The surety must hold a certificate of authority from the U.S. Treasury under 31 CFR part 223.
Exceptions
The State Director may grant an exception when another entity handles the funds for the facility and has adequate coverage, or when the government's interest is otherwise protected. Deductibles may be allowed if the borrower can cover them.
Before you buy
Confirm with your Rural Development loan official which form they want, the positions to list and the coverage amount for each, and how the executed bond should be delivered. The premium is set by the surety based on the total coverage and the borrower's finances and controls.
Eligibility and Requirements for an All States Position Fidelity Scheduled Bond - MAIL Bond:
- Surety holding a certificate of authority under 31 CFR part 223.
- Coverage for every person with access to the borrower's funds, by position or blanket.
- Amount normally near total annual debt service on Rural Development loans under 7 CFR 1942.17.
- United States named as coobligee where required and permitted by state law.
- Coverage kept in force for the full life of the loan.
All States Position Fidelity Scheduled Bond - MAIL Bond FAQs:
For community facility type loans, Rural Development normally requires coverage close to your total annual debt service on its loans, per 7 CFR 1942.17. Your loan official sets the exact figure, and it may differ by position on the schedule.
No. The regulation says Form RD 440-24 may be used and that similar forms are allowed if Rural Development finds them acceptable. Blanket employee dishonesty coverage can also qualify.
By loan closing or the start of construction, whichever happens first. It must then be maintained for as long as the loan is outstanding.
Possibly. The State Director can grant an exception when another entity handles the facility's funds and has adequate coverage, or when the government's interest is otherwise protected. Ask before closing.
