STAFF STUDY ON BONDING OF AGENCY PERSONNEL

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-04718A000900110004-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 12, 2016
• Document Release Date: March 26, 2001
• Sequence Number: 4
• Publication Date: April 21, 1954
• Content Type: MF

Approved For Release 2002/01/07 CIA-RDP78-04718A00090
110004-8 7'
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APR211954
OGC Has Reviewed
MEMORANDUM FOR: Director of Central Intelligence
THROUGH Acting Deputy Director (Administration)
SUBJECT : Staff Study on Bonding of Agency Personnel
To determine the continued desirability of present Agency policy
with regard to bonding Agency personnel having custody of or authorizing
the use of Government funds.
a. Present Agency policy requires that all Certifying Officers be 25X1A
bonded in the amount of $5,000 that Agent Cashiers main-
tain a bond in the form and amour requ e by the DCI and the Secretary
of the Treasury and that when security or operation con- 25X1A
siderations perm a o er official custodians of funds be bonded 25X1A
as recommended by the Comptroller FOIAb5
b. Normally, finance officers and other official custodians are
FOIAb5
c. All bonds for finance officers, Agent Cashiers, other official
custodians, and Certifying Officers are maintained with the
All applica ons or
bonds state that the 'individual is an employee of the Central Intelli-
gence Agency. Actual U. S. home addresses are indicated on the bond,
but the place of duty is stated to be either "Washington, D.C." or
"outside the continental limits of the United States."
d. There are at present 41 official custodian bonds, 7 Agent
Cashier bonds, and 50 Certifying Officer bonds, costing the Agency
$2,794.75 annually in premiums. The number of bonds for official
custodians constitutes approximately 8 of all known custodians. In
addition, there are considerable numbers of personnel in the field.to
whom funds have been advanced by field custodians which have not been
considered in the above percentage.
e. No claims have ever been presented to a bonding company by this
Agency since its inception.
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3. DISCUSSION
a. Each time an official custodian or Certifying Officer is designated
the Finance Division, Office of the Comptroller, ascertains whether a
surety bond is practicable in view of the cover conditions surrounding
the individual assignment. Actually, because of security reasons, only
a very limited number of such individuals are bonded by CIA. Personnel
b. Even if all Certifying Officers and official custodians were
satisfactorily bonded, it appears that only in a minimum of cases, if
any, would CIA ever pursue collection from the bonding company in a case
of defalcation, fraud, etc. It is the practice of bonding companies
paying a claim to insist upon making an investigation of the circumstances
surrounding the loss and to be subrogated to the rights of the assured
against the defaulting employee. To deny access to locations and records
would abrogate the contractual relations with the bonding company and
make our recourse to the company ineffectual. The Agency, in the absence
of bond coverage, would have access to the courts for either criminal
prosecution or civil suit for recovery of the loss in those cases when
security would not prohibit active pursuit of collection, and could
perform the function of a bonding company to the extent of taking other
action to effect recovery from the individual.
c. Informal discussions have been held with a representative of the
to determine if a blanket position bond could
be prow a to cover a custodians without revealing the names of the
individuals covered. It was the opinion of the bonding company's
representative that before the company would provide a blanket position
bond to the Agency, the Agency would be required to obtain special
legislation to authorize such coverage. A position schedule bond might
not require listing with the bonding company the names or locations of
each individual covered but would reveal to a substantial degree the
extent and methods of our activities.
d. The amount of bond coverage for individual official custodians
now bonded is insignificant in relation to the sums of money to which
they have access and accordingly affords no more than a nominal protection
to the Agency. The extent of the coverage is insignificant both as to the
percentage of official custodians who are bonded and as to the face amount
of coverage of individual custodians in relation to the sums of money for
which they are responsible. Official custodians' bonds are written in the
amount of only $10,000 each and relatively few of such employees are
covered because of security considerations and the necessity for frequent
changes at overseas stations in the employees designated to handle
official funds.
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e. One advantage frequently cited for procuring surety bond coverage
on employees entrusted with funds is that personal investigations of the
employees covered are made by the bonding company before coverage is
extended. This reason for bonding is not of significance to CIA inasmuch
as CIA employees undergo very strenuous investigations prior to employment
and continual investigations are conducted throughout the period of their
employment with the Agency.
4. CONCLUSIONS
a. In view of the fact that security factors preclude both the bonding
of many employees by the Agency and the presentation of claims to the
bonding companies in actual cases of defalcation, fraud, etc., by bonded
employees, it is believed impractical for the Agency to purchase individual
bond coverage for its official custodians and Certifying Officers.
b. Likewise, security objections would exist to making claims against
any bonding company if the Agency were to procure a blanket position bond
covering official custodians and Certifying Officers at all locations.
c. Bond coverage of official custodians at present is only nominal in
relation to both the number of such employees and the amount of money
handled by them. Because of security and the need for frequent transfers
or temporary replacements of custodians it is not practicable to obtain
coverage on all such employees. The value of this coverage is questionable
since based on past experience it is unlikely that the Agency would present
a claim to the bonding company whenever losses were to occur.
d. While all Certifying Officers are bonded in the amount of $5,000
each, the value of such coverage also is questionable since it is unlikely
that the Agency would make a claim against the bonding company under the
bonds.
5. RECOMIENDATIONS
a. The procurement of surety bonds for Certifying Officers and official
custodians, except Agent Cashiers,, concerned with confidential funds be
discontinued for security reasons*
b. Since the bonding of Agent Cashiers is a requirement of the United
States Department of the Treasury, these bonds be continued.
c. Subject to approval of a. and b., above, the Agency regulations be
amended to provide that surety bonds be required with respect to the
confidential funds activities of the Agency only for Agent Cashiers.
o 1D N IAL Comptroller
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CONCURRENCE SHEET
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