RepublicofthePhilippines OFFICE OF THE PRESIDENT Department of Finance COOPERATIVE DEVELOPMENT AUTHORITY

827AuroraBoulevard,ImmaculateConception,Cubao,QuezonCity,Philippines Tel.No.(02)7255510;Tel/Fax(02)7258536

MEMORANDUMCIRCULARNO.201113 Seriesof2011 TO : ALLCONCERNED SUBJECT : FIDELITYBONDANDSURETYBONDASDEFINED DATE : APRIL11,2011 Several queries have been raised to this Authority why the bond required for the director, officer and employees handling funds, securities or property on behalf of the cooperative shall be coveredbyasuretybond(Art.56ofR.A.9520)insteadoffidelitybond. Forinformation,belowisthedefinitionoftwoterms: Asuretybondisapromisetopayoneparty(theobligee)acertainamountifasecondparty(the principal) fails to meet some obligations, such as fulfilling the terms of a contract. The surety bond protects the obligee against losses resulting from the principals failure to meet the obligation. It is a contractamongatleastthreeparties:(1)Theobligeethepartywhoistherecipientofanobligation(2) Theprincipaltheprimarypartywhowillbe performingthe contractualobligationsand(3) Thesurety whoassurestheobligeethattheprincipalcanperformthetask.Itisguaranteeinsurance. A fidelity bond is a form of insurance protection that covers policyholders for losses that they incurasaresultoffraudulentactsbyspecifiedindividuals.Itusuallyinsuresabusinessforlossescaused by the dishonest acts of its employees. While called bonds, these obligations to protect an employer from employeedishonesty losses are really insurance polices. These insurance policies protect from lossesofcompanymonies,securitiesandotherpropertyfromemployeeswhohaveamanifestintentto cause the company loss. The other forms of crimeinsurance policies (burglary, fire, general theft, computertheft,disappearance,fraud,forgeryetc.)toprotectcompanyassets.Itiscrimeinsurance. Forinformationandguidance. APPROVEDonApril7,2011perBOAResolutionNo.78,S2011. THEBOARDOFADMINISTRATORS By: (SGD) EMMANUELM.SANTIAGUEL,Ph.D. Chairman