A financially responsible officer bond is a legal contract binding three parties together.
- The principal is the financially responsible officer
- The obligee is the state government agency who requires the bond
- The surety is the insurance company who issues the bond.
If a financially responsible officer or the construction company conducts fraudulent activities (i.e., lying to customers, not completing a construction task), the obligee can seek reimbursement by filing a claim against the financial responsible officer bond. If a claim is prove to be valid, the surety will pay for the claim up to the bond amount. Then, the surety will require reimbursement from the financially responsible officer