(a) General considerations. Section 502(a) requires ``every'' person
specified in its bonding requirement ``who handles'' funds or other
property of the labor organization or trust to be bonded. It does not
contain any exemption based on the amount of the funds or other property
handled by particular personnel. Therefore, if the bonding requirement
is otherwise applicable to such persons, the amount of the funds or the
value of the property handled by them does not affect such
applicability. In determining whether a person ``handles'' funds or
other property within the meaning of section 502(a), however, it is
important to consider the term ``handles'' in the light of the basic
purpose which Congress sought to achieve by the bonding requirement and
the language chosen to make that purpose effective. Thus, while it is
clear that section 502(a) should be considered as representing the
minimum requirements which Congress deemed necessary in order to insure
the reasonable protection of the funds and other property of labor
organizations and trusts within the coverage of the section, it is
equally clear from the legislative history \7\ and the language used
that Congress was aware of cost considerations and did not intend to
require unreasonable, unnecessary or duplicative bonding. In terms of
these general considerations, more specific content may be assigned to
the term ``handles'' by reference to the prohibition in section 502(a)
against permitting any person not covered by an appropriate bond ``to
receive, handle, disburse, or otherwise exercise custody or control'' of
the funds or other property of a labor organization or of a trust in
which a labor organization is interested. The phrase ``receive, handle,
disburse, or otherwise exercise custody or control'' is not to be
considered as expanding the scope of the term ``handles'' but rather as
indicating facets of ``handles'' which in a specific prohibition,
Congress believed should be clearly set forth.
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\7\ House Report No. 1147, 86th Congress, 1st Session, p. 35; Daily
Cong. Record 16419, Senate, Sept. 3, 1959; Hearings Before the
Subcommittee on Labor of the Senate Committee on Labor and Public
Welfare on S. 505, S. 748, S. 76, S. 1002, S. 1137, and S. 1311, 86th
Congress, 1st Session, p. 709.
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(b) Persons included generally. The basic objective of section
502(a) is to provide reasonable protection of funds or other property
rather than to insure against every conceivable possibility of loss.
Accordingly, a person shall be deemed to be ``handling'' funds or other
property, so as to require bonding under that section, whenever his
duties or activities with respect to given funds or other property are
such that there is a significant risk of loss by reason of fraud or
dishonesty on the part of such person, acting either alone or in
collusion with others.
(c) Physical contact as criterion of ``handling.'' Physical dealing
with funds or other property is, under the principles above stated, not
necessarily a controlling criterion in every case for determining the
persons who ``handle'' within the meaning of section 502(a). Physical
contact with cash, checks or similar property generally constitutes
``handling.'' On the other hand, bonding may not be required for office
personnel who from time to time perform counting, packaging, tabulating
or similar duties which involve physical contact with checks,
securities, or other funds or property but which are performed under
conditions that cannot reasonably be said to give rise to significant
risks with respect to the receipt, safekeeping or disbursement of funds
or property. This may be the case where significant risks of fraud or
dishonesty in the performance of duties of an essentially clerical
character are
precluded by the closeness of the supervision provided or by the nature
of the funds or other property handled.
(d) ``Handling'' funds or other property without physical contact.
Personnel who do not physically handle funds or property may
nevertheless ``handle'' within the meaning of section 502(a) where they
have or perform significant duties with respect to the receipt,
safekeeping or disbursement of funds or other property. For example,
persons who have access to a safe deposit box or similar depository for
the purpose of adding to, withdrawing, checking or otherwise dealing
with its contents may be said to ``handle'' these contents within the
meaning of section 502(a) even though they do not at any time during the
year actually secure such access for such purposes. Similarly, those
charged with general responsibility for the safekeeping of funds or
other property such as the treasurer of a labor organization, should be
considered as handling funds or other property. It should also be noted
that the extent of actual authority to deal with funds or property may
be immaterial where custody or other functions have been granted which
create a substantial risk of fraud or dishonesty. Thus, if a bank
account were maintained in the name of a particular officer or employee
whose signature the bank were authorized to honor, it could not be
contended that he did not ``handle'' funds merely because he had been
forbidden by the organization or by his superiors to make deposits or
withdrawals.
(e) Disbursement of funds or other property. It is clear from both
the purpose and language of section 502(a) that personnel described in
the section who actually disburse funds or other property, such as
officers or trustees authorized to sign checks or persons who make cash
disbursements, must be considered as handling such funds and property.
Whether others who may influence, authorize or direct disbursements must
also be considered to handle funds or other property can be determined
only by reference to the specific duties or responsibilities of these
persons in a particular labor organization or trust.
[28 FR 14394, Dec. 27, 1963, as amended at 30 FR 14925, Dec. 2, 1965]
