Annual Financial Report 12/31/1992

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City of Lino Lakes, Minnesota Legal Compliance Report, Page 4 FINDING: No Performance Bond on Work Performed For An Amount Over $10.000 CONDITION: For a contract over $10,000, the contractor must provide a performance bond. There was no performance bond provided for construction performed by Jim's Remodeling on the Old Fire Hall for $14,000. CRITERIA: Minnesota Statute 574.26 reads as follows: 574.26 CONTRACTORS' BONDS. Except as provided in sections 574.263 and 574.264 or if the amount of the contract is $10,000 or less, a contract with the state, or with any municipal corporation or other public board or body thereof, for the doing of any public work, is not valid unless the contractor shall give bond to the state or other body contracted with, for the use of the obligee, the state and of all persons doing work or furnishing skill, tools, machinery, or materials or insurance premiums or equipment or supplies for any camp maintained for the feeding or keeping of workers and animals engaged under, or for the purpose of, such contract, conditioned for the payment, as they become due, of all just claims for such work, tools, machinery, skill, materials, insurance premiums, equipment, taxes incurred under section 290.92 or chapter 297A, and supplies for the completion of the contract in accordance with its terms, for saving the obligee harmless from all costs and charges that may accrue on account of the doing of the work specified, and for the enforcing of the terms of the bond if action is brought on the bond, including reasonable attorney's fees, in any case where such action is successfully maintained and for the compliance with the laws appertaining thereto. The penalty of such bond shall be not less than the contract price, and if after the giving of the bond the contract price should for any reason by increased, the obligee may require an additional bond, the penalty of which shall be not less than the amount of such increase, and if such additional bond be not furnished within ten days after such demand, the work on the contract shall cease until such additional bond shall have been furnished. In contracts made by the commissioner of administration or the department of transportation of the state, the penalty of the bond shall be in such amount as the commissioner of administration or the commissioner of transportation may fix, but not less than three quarters of the contract price. RECOMMENDATION: We recommend that the City receive performance bonds for work to be performed in excess of $10,000.