12-2627.   Board of trustees of pool, qualifications, duties;administrator, bond; audits; credit transactions; delegation of authorityfrom board to administrator.To ensure the financial stability of the operations of each group-fundedpool, the board of trustees of each pool is responsible for all operationsof the pool. The board of trustees shall consist of not less than threepersons selected according to the bylaws of the pool for stated terms ofoffice to direct the administration of a pool, and whose duties includeapproving applications by new members of the pool. The majority of thetrustees must be a member of the governing body or an officer or employeeof members of the pool, but a trustee may not be an owner, officer oremployee of any service agent or representative. All trustees shall beresidents of this state unless the pool was formed on or before January 1,1990, in which event the number of Kansas resident trustees of the pool must bethat percentage of all trustees of the pool that equals the percentage of thenumber of Kansas lives covered by the pool with respect to all lives covered bythe pool on the last day of the prior fiscal year of the operation of thepool. The board of trustees of eachfund shall take allnecessary precautions to safeguard the assets of the fund, including all of thefollowing:

      (a)   Designate an administrator to administer the financial affairs ofthe pool who shall furnish a fidelity bond to the pool in an amount determinedby the trustees to protect the pool against the misappropriation or misuseof any moneys or securities. The administrator shall file evidence of thebond with the commissioner. The bond shall be one of the conditionsrequired for approval of the establishment and continued operation of apool. Any administrator so designated shall be a resident of Kansas if anindividual or shall be authorized to do business in Kansas if a corporation.

      (b)   Retain control of all moneys collected or disbursed from the pooland segregate all moneys into a claims fund account and an administrativefund account. All administrative costs and other disbursements shall bemade from the administrative fundaccount. The trustees may establish a revolving fund for use bythe authorized service agent which is replenished from time to time fromthe claims fund account. The service agent and its employees shall be coveredby a fidelity bond, with the pool as obligee, in an amount sufficient toprotect all moneys placed in the revolving fund.

      (c)   Audit the accounts and records of the pool annually or at any timeas required. The commissioner shall prescribe the type of audits and a uniformaccounting system for use by pool and service agents to determine theability of the pool to pay current and future claims.

      (d)   The trustees shall not extend credit to individual members for any purpose.

      (e)   The board of trustees shall not borrow any moneys from the pool orin the name of the pool without advising the commissioner of the natureand purpose of the loan.

      (f)   The board of trustees may delegate authority for specific functionsto the administrator of the pool. The functions which the board may delegateinclude such matters as contracting with a service agent, determining thepremium chargeable to and refunds payable to members, investing surplusmoneys and approving applications for membership. The board of trusteesshall specifically define all authority it delegates in the written minutesof the trustees' meetings. Any delegation of authority shall not be effectivewithout a formal resolution passed by the trustees.

      History:   L. 1987, ch. 74, § 12; L. 1989, ch. 65, § 1;L. 1991, ch. 60, § 6; May 23.