New Fannie Mae rules introduced in late 2009 indicate that associations with 20 or more unit are required by regulation to have fidelity bond coverage as part of the association's insurance program. While it may be tempting to omit this coverage for smaller associations I would recommend that ALL associations carry it. The reasons are simple: 1) the coverage does not cost that much; and, 2) even in good economic times volunteers responsible for the cash at all manner of non-profit organizations occasionally do clean out the treasury and head for places unknown!
Fidelity bond coverage protects your association's day-to-day and reserve funds by reimbursing the association if someone takes the money and runs. While Fannie Mae has rules about how much coverage an association should have I'll make it simple; think of the maximum amount you might accumulate in both day-to-day and reserve accounts over the years before you have a big expenditure like a re-roof - the highest total amount should be your coverage limit.
Board members should try to visualize what life would be like if the association's treasury were cleaned out and they had to start over from scratch. This is not a pretty picture for any association! All the more reason to make sure your association has fidelity bond coverage and in the right amount. Give this item some scrutiny during your annual review of the association's master insurance policy.