Fidelity bonds protect your business against a fraudulent act by your treasurer. I see far more things clubs should be concerned about issues with incorrect records due to incompetence on the part of the treasurer rather than intentional fraud. Bonding wouldn't help under those circumstances
It probably depends on your asset size and your comfort level with other members of your club whether you really need to go as far as to purchase bonding insurance for your club. We don't offer it because we've never seen any demand for it. We also don't charge each member of your club a "Membership" fee to "belong" to bivio.
It is, however, very important for any business, even an investment club, to have a good set of financial internal controls. These include things like:
Segregation of duties - Different individuals should be be assigned responsibility for different elements of related
activities, particularly those involving authorization, custody, or
recordkeeping. For example, having the treasurer be the one who also handles the actual financial account transactions is not the optimal control situation. From a control standpoint, it would be better if account transactions are handled by someone other than the member who is keeping the clubs records.
Proper authorization of transactions and
activities helps ensure that all club activities adhere to
established guide lines. If you are concerned in your club, perhaps you need to set up a system where two signatures are required to conduct business through your financial accounts such as writing checks.
Adequate documents and records provide evidence
that financial statements are accurate. Part of your financial report at each meeting should be materials from the brokerage that are available to all that show that the information reported by your brokerage agrees with the information shown on bivio reports.
Independent checks on performance, which are carried
out by members who did not do the work being checked, help ensure the
reliability of accounting information. This is why we provide you with the information you need to conduct at least an annual audit of your clubs finances by someone other than the club treasurer.
Implementing controls like these will go a long way toward protecting your club, not only against fraud, but also against incompetence. It is the responsibility of everyone in your club to make sure your club records are accurate, not just your club treasurer.
Laurie Frederiksen Invest with your friends! www.bivio.com
Thank you, Laurie, for your excellent response. Yes, we full trust our very competent treasurer and assistant treasurer, use Bivio accounting controls, share reports, and audit regularly.
However, as our portfolio approaches $100,000, we see ourselves as a REAL business (rather than a hobby) and wondered if we should consider bonding. It is my understanding that bonding is for the POSITION rather than the person, is very inexpensive, and would be one more mark of professionalism. And since NAIC/BI offers it, we wondered why doesn't Bivio.
Since the Average Bivio portfolio is some $11`6,000+, there must be some very large ones. Have they considered bonding?
On Mon, Sep 8, 2014 at 9:58 AM, Laurie Frederiksen <laurie@bivio.biz> wrote:
Dear Jeanne,
Fidelity bonds protect your business against a fraudulent act by your treasurer. I see far more things clubs should be concerned about issues with incorrect records due to incompetence on the part of the treasurer rather than intentional fraud. Bonding wouldn't help under those circumstances
It probably depends on your asset size and your comfort level with other members of your club whether you really need to go as far as to purchase bonding insurance for your club. We don't offer it because we've never seen any demand for it. We also don't charge each member of your club a "Membership" fee to "belong" to bivio.
It is, however, very important for any business, even an investment club, to have a good set of financial internal controls. These include things like:
Segregation of duties - Different individuals should be be assigned responsibility for different elements of related
activities, particularly those involving authorization, custody, or
recordkeeping. For example, having the treasurer be the one who also handles the actual financial account transactions is not the optimal control situation. From a control standpoint, it would be better if account transactions are handled by someone other than the member who is keeping the clubs records.
Proper authorization of transactions and
activities helps ensure that all club activities adhere to
established guide lines. If you are concerned in your club, perhaps you need to set up a system where two signatures are required to conduct business through your financial accounts such as writing checks.
Adequate documents and records provide evidence
that financial statements are accurate. Part of your financial report at each meeting should be materials from the brokerage that are available to all that show that the information reported by your brokerage agrees with the information shown on bivio reports.
Independent checks on performance, which are carried
out by members who did not do the work being checked, help ensure the
reliability of accounting information. This is why we provide you with the information you need to conduct at least an annual audit of your clubs finances by someone other than the club treasurer.
Implementing controls like these will go a long way toward protecting your club, not only against fraud, but also against incompetence. It is the responsibility of everyone in your club to make sure your club records are accurate, not just your club treasurer.
Laurie Frederiksen Invest with your friends! www.bivio.com
I think you've gotten some nice feedback from other clubs about what they do with respect to bonding. I can't add much more to that discussion. It's not something we use in either of the clubs I'm a member of. It's really up to your club. With the level of assets your club has, you'd need to determine whether any extra peace of mind you'd get from the insurance was worth the cost.
As I mentioned, we don't provide it because we do not get requests from clubs to provide it. In general, we do not try to up sell clubs by providing them with "benefits" that will increase our profits. Nor do we charge each of your members membership fees to provide you "free" services.
Your best bet is to talk to one or more insurance agents in your area. They can provide you with details about what a policy would cover, and can give you quotes on purchasing one for your club if you decide that you feel it is important.
Hope that helps.
Laurie Frederiksen Invest with your friends! www.bivio.com