CMS SOM App. PP, Tag F570

The facility must purchase a surety bond, or otherwise provide assurance satisfactory to

the Secretary, to assure the security of all personal funds of residents deposited with the

facility.

DEFINITION §483.10(f)(10)(vi)

“Surety bond” is an agreement between the principal (the facility), the surety (the insurance

company), and the obligee (depending on State law, either the resident or the State acting on

behalf of the resident), wherein the facility and the insurance company agree to compensate the

resident (or the State on behalf of the resident) for any loss of residents’ funds that the facility

holds, safeguards, manages, and accounts for.

GUIDANCE §483.10(f)(10)(vi)

The purpose of the surety bond is to guarantee that the facility will pay the resident (or the State

on behalf of the resident) for losses occurring from any failure by the facility to hold, safeguard,

manage, or account for the resident’s funds (for example, losses occurring as a result of acts or

errors of negligence, incompetence, or dishonesty). The surety bond protects the resident or the

State, not the facility, from loss. It differs from a fidelity bond, which covers no acts or errors of

negligence, incompetence, or dishonesty. The surety bond is the commitment of the facility in

an objective manner that the facility will hold, safeguard, manage and account for the personal

funds residents have deposited with the facility. The facility assumes the responsibility to

compensate the resident or the State for the amount of the loss up to the entire amount of the

surety bond.

The surety bond is not limited to personal needs allowance funds. Any resident funds that are

entrusted to the facility for a resident must be covered by the surety bond, including refundable

deposit fees.

The facility cannot be named as a beneficiary.

Self-insurance is not an acceptable alternative to a surety bond. Likewise, funds deposited in

bank accounts protected by the Federal Deposit Insurance Corporation, or similar entity, also are

not acceptable alternatives.

PROCEDURES §483.10(f)(10)(vi)

Through interviews with residents or their representative, determine if they were compensated

for losses occurring from any failure by facility staff to hold, safeguard, manage, or account for

the residents’ funds (for example, losses occurring as a result of acts or errors of negligence,

incompetence, or dishonesty). If concerns arise based on these interviews, review the facility’s

records to determine whether these concerns are substantiated.

If the State survey agency determines that individual circumstances associated with a facility’s

surety bond or its alternative are such that the survey agency cannot determine whether or not the

facility is in compliance with these requirements, then it would be appropriate to make the

referral to the State’s fiscal department.

If a corporation has a surety bond that covers all of its facilities, there should be a separate

review of the corporation’s surety bond by the appropriate State agency, such as the State’s fiscal

department, to ensure that all the residents in the corporation’s facilities within that State are

covered against any losses due to acts or errors by the corporation or any of its facilities. The

focus of the review should be to ensure that if the corporation were to go bankrupt or otherwise

cease to operate, the funds of the residents in the corporation’s facilities would be protected.