Evening star., 1909-07-15
HIGH COST OF SURETY
Premiums of S923,357.03 to
Cover $99.81O.28 Losses.
COMMITTEE HAS HEARING
Representative Tawney Fights Pro-
posed Increased Rates.
AUDITOR ANDREWS VIEWS
Liability Reduced One-Half by I'm
proved Methods of Ac-
counting.
AUDITOR ANDREWS VIEWS

In the course of the hearings before
the House appropriations committee OF
the bonding of government officials Mt
Tawney produced a statement showing
that in the past FIVE years the losses 10
the bonding companies by detan'tlhg
bonded government officials aggregated
99.s1O.os. while at the proposed new
rate of premiums TO he charged by those
companies the premiums would be SG25,-
3357.Gs
OF each dollar received by the COM
pany in premiums. IL cents would be paid
out for losses and 50 cents go 10 the
company as profit. This ratio Mr.. TaW-
ney regards a. excessive.
The figures are exclusive of the postal
service. The Indian service will pay Sa,-
COO year in premiums on bonds. while
the average loss for the last twenty years
has been less than $1,000 In the postal
service the average annual loss is So, 600,
while the total premiums are S32o,10o per
year.
In the face Of this situation the bond
ing companies have raised their rates of
premiums. Mr.. Tawney proposes to limit
the payment for premiums to the rate
heretofore applied
Testimony Before Committee.
ury Department. testifying before the
committee. said:
From an administrative standpoint it
would be a perfectly workable provision,
for the reason that we have definite in
formation in most cases. of the rates
heretofore paid by federal principals; and
if the law should provide that the rates
hereafter should be the average rates
charged for several years past. or the
lowest or highest rates charged in the
last few years. that could be definitely as
certained. if not from the information
that the department already has. then by
information from the principals who have
paid the rate to the surety compani- s.
This question of rates has already re-
ceived great deal of consideration i'll
the states. and some of the states have
adopted this very eXpedient which you
have under consideration. in the absence
of proper standard. of compelling com
panies to go back to the old rates until
a proper rate can be ascertained.'
Auditor Andrews of the Treasury De-
partment in his testimony said:
II consider that the improved methods
made within the last ten years through
the administrative and accounting offices
have reduced that contingent liability at
least one-half.'
1t was contended strenuously by the
companie that they constitute very much
better security for the government than
any other form of sureties. and they sue-
gested that private sureties sometimes
make practice of putting their property
out of their hands after liability is dis
covered for the purpose of cheating and
defrauding the government. Mr.. Smith
asked Mr.. Andrews if the government
had in fact sustained substantial losses In
that way.
Private Sureties Satisfactory.
I'VE have never yet, since i have been
In the department, had any more diff
Guilty in the recovery of losses from pri-
vate sureties than we have had from
surety compa nies,' said Mr. Andrews.
And less litigation
AS rule perhaps that is true. The
companies, I take it, would pay in more
promptly. or stay further away from iti-
CATION. because they have trained attor-
neys VINO might see the fruitlessness of
litigation
Controller Tracewell was asked BY Mr..
Tawney:
Il want to refer again TO the question
discussed a moment ago-that is, the IL
ability of the surety not being dependent
entirely upon the honesty and integrity
of the principal of the bond. When be-
fore us few days ago. MIR. Bartlett stat
ed: We have found that the most seri-
Gus risks that We assume in connection
with the government are not due to dis
honesty but to some failure to apply
an excessively technical provision or rui-
ing, whether statute OF ruling Of the
department. And those questions come up
years and years after.
THAT is absolutely not true said Mr..
Tracewell. II do not think that a surety
company or any other surety has paid a
dollar unless there has been an act Of
dishonesty, since / have been the con-
troller.
They have not paid 81 since | have