Fidelity Fund Creation and Administration Act

Capital funding and overdraft rules

Section 2 appropriates PHP 50,000 as the permanent capital of the fidelity fund from any moneys in the Insular Treasury not otherwise appropriated.
Section 2 provides that all accretions and gains from premiums, interest, earnings, or otherwise accrue to the fidelity fund until the combined capital and net earnings reach PHP 100,000.
Section 2 requires that any excess beyond PHP 100,000 revert to the general funds.
Section 2 establishes an overdraft mechanism: if total claims payable from the fidelity fund exceed the capital and net earnings, the needed deficit is advanced from the general surplus of the Insular Government until the overdraft is offset by future net earnings of the fund.

Premium rate, payment, and employee share

Section 3 empowers the Governor-General to fix and change (from time to time) the annual premium charge for insurance of the fidelity of bonded officers and employees.
Section 3 requires the premium rate to be uniform throughout the service.
Section 3 provides that the premium is paid by the Bureau, Office, province, municipality, or other governmental unit to which the bonded position pertains.
Section 3 requires that one-third of the premium is repaid by the officer or employee to the concerned governmental entity, except for cases where the officer or employee is exempted under this Act.
Section 3 provides that when an official acts in a bonded capacity for two or more governmental units, the governmental share of the premium is borne by the respective units in proportion determined by the Insular Auditor.

Claims processing and payment authority

Section 4 requires that all claims against the fidelity fund be made or forwarded to the Insular Auditor with evidence supporting the claim.
Section 4 provides that if the Insular Auditor recommends payment (in whole or in part) and the recommendation is approved by the Governor-General, the claim becomes a legal claim against the fidelity fund.
Section 4 provides that payment is made only when Auditor recommendation and Governor-General approval occur.

Bond approval, records, and regulations

Section 5 requires that all bonds be approved in form, amount, and sufficiency by the Insular Auditor.
Section 5 imposes on the Insular Treasurer the duty to prepare and keep an accurate record of bonded positions.
Section 5 authorizes the Insular Treasurer to prescribe rules and regulations necessary to effectuate the Act, subject to approval by the Secretary of Finance and Justice.

When bonding liability begins

Section 6 provides that when an appointment or designation to a bonded position or employment becomes effective by election and due qualification (where required by law), the appointee is ipso facto deemed bonded.
Section 6 provides that liability begins with the discharge of duties and the premium is calculated as of that date.
Section 6 provides that bond protection and security are available without waiting for formal application for the bond.

Mandatory notifications of bonded personnel

Section 7 requires that the chief of the Bureau or Office concerned, provincial and municipal treasurers, and the secretary of the Municipal Board of the city of Manila must, in all cases and without delay, notify the Insular Treasurer by mail upon appointment or designation of:
- a bonded official or employee; or
- an acting or temporary appointee.
Section 7 requires immediate communication of all changes or vacancies in personnel.
Section 7 allows enforcement through necessary administrative measures to compel and enjoin strict compliance.
Section 7 authorizes the Insular Treasurer, if the character, associations, or habits of the bonded person do not constitute a conservative risk, to report facts or reasons to the Governor-General for his action.

Who is covered as “bonded”

Section 8 provides that persons whose offices or employment are listed by the Insular Treasurer are deemed bonded.
Section 8 requires that the bonding covers faithful performance of duties now or hereafter imposed by law.
Section 8 requires faithful accounting for public funds and public property that come into the person’s possession, custody, or control through appropriation, collection, transfer, or otherwise.
Section 8 requires bonding for lawful payment, disbursement, expenditure, or transfer of such public funds or property in the person’s possession or control as accountable or responsible officers.

Government recovery after fidelity fund payment

Section 9 provides that when losses or defalcations are made good from the fidelity fund, the Government must pursue civil remedies against the principal or obligor on the bond that best serve the public welfare.
Section 9 authorizes attachment of the absconding or defaulting officer or employee’s goods and chattels, moneys and effects, lands, and property of every kind.
Section 9 provides that the Government retains all remedies a private creditor might have notwithstanding any penal prosecution for the crime, if any.
Section 9 provides that proceeds from such recovery are reverted to the fidelity fund.

Investment and disposition of fidelity fund moneys

Section 10 authorizes the Insular Treasurer to deposit fidelity fund moneys at interest in any Government depository.
Section 10 authorizes investment, with approval of the Governor-General, in securities and loans that are readily convertible.

Separate bond requirements for sheriffs

Section 11 requires that the governor of a province, or a lawfully appointed sheriff if the governor declines to act, must execute a bond before qualification to perform sheriff duties.
Section 11 requires the sheriff bond to run to the Government of the Philippine Islands for the benefit of whom it may concern, with not less than three sureties, and in a penal sum fixed by the Insular Auditor.
Section 11 requires sureties to qualify under oath before the judge of the Court of First Instance, or in the judge’s absence, before the clerk of the court.
Section 11 conditions the bond on faithful performance by the sheriff and deputies and payment to the Government or persons entitled of all sums officially received.
Section 11 requires the bond form be prescribed by the Auditor, approved, and forwarded to the Insular Treasurer for filing.
Section 11 requires an endorsement by the provincial treasurer stating that, after investigation, the sureties collectively own real property in double the amount of the bond, free from incumbrances and over and above liabilities.
Section 11 provides that until Auditor approval, the officer has no entitlement to fees for services performed; Auditor approval is effective as of the bond date.
Section 11 provides that the bond is available for the benefit of the Government and any person in interest.
Section 11 allows the governor or sheriff to require each deputy to execute a sufficient indemnity for protection against wrongdoing by the deputy.

Exemption from one-third premium share

Section 12 authorizes the Philippine Commission, by resolution, to exempt an accountable officer or employee from the payment of their part of the bond premium.
Section 12 provides that exemptions continue for officers and employees already exempted unless the Philippine Commission later resolves otherwise.

Temporary designation: who pays premium and charges

Section 13 applies when officials, employees, or agents are designated temporarily to perform head-of-bureau or subordinate duties or employment under an Office, Bureau, or province.
Section 13 requires that fidelity and premium charges accruing from the temporary designation be paid wholly from the appropriation or funds of the Department, Bureau, province, or municipality where the services are rendered.

Repeal of prior fidelity-fund law

Section 14 repeals Act Numbered One thousand seven hundred and thirty-nine, as amended.
Section 14 requires that all funds on deposit under that repealed Act be reverted at once to the Government’s general unappropriated surplus funds.
Section 14 repeals all Acts or parts of Acts inconsistent with this Act.

Effectivity

Section 15 provides that the Act takes effect December thirty-first, nineteen hundred and fourteen.