Flagstaff Unified School District #1

FUSD SELF-INSURANCE TRUST BYLAWS INTRODUCTION

The Self-Insurance Trust of Flagstaff Unified School District #1 of Coconino County ("FUSD"), in order to more clearly set forth its powers and duties, does hereby establish these Bylaws.

ARTICLE I COMMITTEE NAME

Section 1         The name of this committee shall be the Flagstaff Unified School District #1 (FUSD) Self-Insurance Trust (“FSIT”).

ARTICLE II PURPOSE

Section 1         WHEREAS, the District may, pursuant to AR.S. § 15-382 and§ 15-387, provide self insured and/or insurance programs;

WHEREAS, the District deems it to be in the best interest of its employees to establish self-insured and/or insurance programs pursuant to AR.S. § 15-382 and§ 15-387 of the Arizona Revised Statutes and other applicable law;

WHEREAS, the District and/or employees will contribute monies to the Trust, which will constitute a trust fund to be held for the benefit of the employees in accordance with the Trust Agreement approved on April 22, 2014; and

WHEREAS, the District desires the FSIT to accept, hold, preserve, protect, invest, and make payments from the Trust, and the FSIT members are willing to accept, hold, preserve, protect, invest and make payments from such Trust pursuant to the terms of the Trust Agreement approved on April 22, 2014.

Section 2         Purpose. The purpose of this Trust is to provide for the establishment of a self-insured program and/or insurance programs by the District to cover

Employee medical, dental, vision, and life insurance programs, and to authorize the management, funding and administration of the Trust for the purpose herein, including without limitation the payment of insurance premiums. Other financing programs that are processed through this account are Health Savings Accounts (employer/employee), Flexible Spending Accounts (employer/employee), additional life/disability coverages (employee). The

FSIT accepts the Trust and declares they will receive and hold the Trust by virtue of the Trust Agreement and for the uses and purposes and with the powers and duties set forth herein and none other.

Section 3         Trust Fund. The District hereby establishes the Flagstaff Unified School District No. 1, Coconino County, Arizona Self-Insurance Trust. All appropriations from the District, and all other funds, earnings and assets of the Trust, shall be placed in the Trust Fund in a separately maintained bank account designated as a trust account, immediately upon receipt, shall be held in trust and used solely for the purposes permitted herein, shall not be commingled with other funds of the District nor used to secure any obligations of the District other than is expressly provided herein, and shall not lapse at the close of the fiscal year, except that any cash balance remaining after termination of the

self-insurance program and settlement of all outstanding claims shall be used for reduction of District taxes for the budget year. Any monies recovered by the District pursuant to litigation, recovery, salvage value of damaged property, proportionate share monies from any other existing District funds or otherwise, or for damages related to either a liability or property loss for which monies from the Trust have been paid, shall be returned to the Trust.

Section 4         Reservation of Authority. Nothing herein shall modify or restrict the legal obligations of the District to administer and operate appropriate risk management and insurance programs for the District. The District shall retain the sole and absolute right and authority to direct and authorize the establishment, management and administration of an overall insurance program for the District, and shall determine from time to time whether it is in the best interests of the District to procure insurance from any insurer authorized to do business in the State, to establish self-insured programs, to combine self-insured programs and procurement of insurance from third parties, or any combination of the foregoing for various types and dollar amounts of risks, including without limitation deductibles, reinsurance, and joint or participation insurance.

Specifically, without limitation, the District may from time to time, for any period, elect to purchase insurance for any or all of the risks otherwise covered by this Trust, and Trust funds may be used to purchase such insurance. The District shall provide stop-loss coverage and determine the amounts thereof, provided that the excess liability coverage for liability losses may include an annual aggregate limit of no more than three million dollars, and the maximum retention per occurrence shall be one-half of one percent of the District's maintenance and operations budget.

ARTICLE III TRUST MANAGEMENT

Section 1         Appropriations. The District shall appropriate all funds in amounts it determines to be necessary to pay the benefits, losses, claims, and expenses described in Article II Section 2, subject to District budgetary requirements, including that the

funds shall be budgeted within the maintenance and operation section and the budget limitation on increases as prescribed in A.RS. § 15-905. Should monies in the Trust Fund be deemed inadequate at any time to meet current expenditures, a special appropriation may be requested by the Trustees from the District for the remainder of the year or any part thereof.

Section 2         Management and Disbursement of Funds.  Subject to limitations prescribed in the Arizona Revised Statutes and this Agreement, the Trustees agree to manage and disburse Trust assets as follows:

1. To invest and reinvest Trust monies as provided by law and consistent with prudent investment practices and the need for funds in the amounts and at the times reasonably anticipated for the purposes of this Trust;
2. To establish adequate and appropriate reserves for any and all claims against the District covered by this Trust;

3. To pay upon such terms and conditions as deemed appropriate and proper, the legal claims, settlements or judgments (including interest thereon required by law) against the District covered by the self-insured retention program and this Trust;

4. To reject, in whole or in part, settle or compromise any claims made by an Employee or third party against the District;

5. To pay all reasonable costs and expenses of claims administration;

6. To pay all reasonable legal fees, expenses and costs incurred in connection with the administration of the Trust and the defense of any claims that may arise thereunder or related thereto against the District and the Employees;

7. To pay all reasonable costs of investigations of claims;

8. To procure all necessary and appropriate bonds required of the Trustees and otherwise, whether fidelity, surety, performance, legal or other;

9. To pay all reasonable actuary expenses and costs incurred in connection with the administration of this Trust;
10. To pay all reasonable consultant expenses and costs incurred in

connection with the administration of this Trust;

11. To pay all reasonable audit expenses and costs incurred in connection with the administration of this Trust;

12. To pay all other reasonable expenses and costs of approved agents and advisors retained by the Trustees;

13. To pay the expenses of organization and establishment of this Trust, including without limitation all legal and other expenses in connection with its formation, establishment and initial funding; and;

14. To pay such other reasonable and appropriate Trust expenses as

may be necessary in connection with the administration and management of this Trust, including without limitation insurance premiums, risk management consultation and the costs of preventative programs designed to reduce claims.

Section 3         Limitations on Expenditures- Illegal Acts. No expenditures shall be made from the Trust Fund except for authorized purposes as permitted under applicable law and this Agreement. Expenditures from the Trust Fund shall not, under any circumstances, be made for uninsured losses that arise out of, and are directly attributable to an act or omission determined by any court to be a criminal act committed by an Employee.

Section 4         Limitations on Expenditures- Claims Not Covered. Claims which are not covered by the self insured program established hereunder shall not be paid from this Trust. All questions relating to the nature, scope and amount of losses and risks covered by this Trust shall be determined by the Trustees.

ARTICLE IV

COMMITTEE SELECTION AND MEMBERSHIP TERM

Section 1         The FSIT will be comprised of the following members, which shall include the following categories of membership:

1. An odd number of members (a minimum of 3 and up to 9) of the general public selected and appointed by the FUSD Governing Board for terms of 3 years each.

2. The individuals holding the following positions within FUSD:
   1. Superintendent (Non-voting)
   2. Director of Finance (Non-voting)
   3. Benefits Specialist (Non-voting)
   4. Full-Time Employee of the District
3. One (I) FUSD Governing Board member, with one (1) alternate Governing Board member designated to attend BOC meetings in the absence of the appointed member.

Section 2         To safeguard the integrity of the Self-Insured Trust in areas of conflict of interest and personal gains, the following will be applied:

1. General public members must be a resident of the district and registered to vote.
2. The Governing Board will decide if an applicant will be appointed to serve on the FSIT, except as provided in Section l

(B) above, FUSD employees and officials may not serve on the FSIT.

Section 3         FSIT membership shall be 3 years with staggered terms:

1. Membership for FUSD administrators shall end automatically upon the individual leaving such administrative position and the successor to such position shall be automatically appointed to the committee. The term for an administrator shall be for the length of their position and not for a set number of years.
2. The membership of the Governing Board member, and the alternate, may serve for only two (2) consecutive terms before another Governing Board member is to be selected. Membership shall end automatically upon the appointed Governing Board member, or alternate, no longer serving on the Governing Board.

Section 4         Membership Selection:

1. The FUSD Governing Board shall request members of the public who are interested in serving on the FSIT submit a letter of interest and application when a membership position becomes available. The Governing Board shall review the applications and appoint individuals to fill some or all open seats. The Governing Board does not have to appoint an individual to the FSIT, even if there is a vacancy, if the Governing Board does not feel that any applicant is qualified.

2. The FUSD Governing Board shall appoint, at the 1st annual meeting in January, members of the Governing Board to serve on the FSIT. The Governing Board shall decide the main appointment and the alternate.

ARTICLE V

COMMITTEE REMOVAL AND RESIGNATION

Section 1         The FUSD Governing Board may remove a member by majority vote for any of the following:

1. Three consecutive unexcused absences from scheduled FSIT meetings.
2. Neglect of Duty.
3. Proven violations of the FSIT Bylaws.
4. Conviction of a crime as provided in Arizona Revised Statutes Section 15- 512.

Section 2         A FSIT member may resign at any time by submitting a written resignation to the Governing Board.

ARTICLE VI REIMBURSEMENT

No member shall receive a stipend for services on the FSIT. The FSIT shall establish and maintain a budget to underwrite the costs of participation in meetings, site visits, and any necessary travel. If sufficient funds are available and each expense is properly substantiated under the terms of the Internal Revenue Code, each member of the FSIT may be reimbursed by FUSD, in the discretion of the Governing Board, for;

1. Travel expenses, including meals and lodging, incurred for any FSIT-related business, as approved prior to such travel, including mileage, at the then-current IRS rate. Mileage will not be provided for travel within the City of Flagstaff.

A FSIT member seeking reimbursement shall be responsible to submit all claims for reimbursement with proper substantiation to the Director of Finance.

ARTICLE VII VOTING RIGHTS

Section 1         Each FSIT general public member, the Governing Board member, and Full-Time Employee shall have one vote regarding any matter. Any member may abstain from voting on any matter. Other FUSD staff do not vote.

Section 2         Absentee ballots or proxy voting shall not be permitted.

ARTICLE VIII MEETINGS

Section 1       The FSIT shall meet at least semi-annually, or as needed, at 7 AM at the FUSD administrative offices or such other location within the District as designated by the FSIT Chair. All meetings shall be open to the public and shall conform to Arizona Open Meeting Law (A.R.S. Section 38-431 et seq,).

Section 2         Notice of all meetings shall be posted in accordance with Arizona law providing the following information: agenda, date, location and time.

Section 3         The presence of a majority of voting FSIT members shall constitute a quorum necessary to carry out the business of the FSIT. No decision of the FSIT shall be valid unless a majority of the voting FSIT members present concur therein by their votes. The meeting will be cancelled if no quorum is present within fifteen

(15) minutes after the scheduled time.

Section 4         Open meeting:

1. All regular and special meetings of the FSIT and its standing or special committees, if any, shall be open to representatives of the general public.

2. Any FSIT member may present items for the agenda. Non-members may request an item be included on the agenda by notifying the Superintendent, Director of Finance, or Chair of the FSIT. To be considered at a meeting, an item must be placed on the agenda prior to posting the agenda for the meeting.

3. The agenda shall list all matters to be discussed and decided.

4. The committee member who is also a member the District's Governing Board, or such other member as the Board member shall from time to

time designate, shall act as Chair of the FSIT. The Chair shall establish the date, time and place of the meetings, and shall provide the FSIT and the public, at least twenty-four (24) hours prior to the meeting, an agenda of the matters to be covered during the meeting; and shall preside at all meetings of the FSIT.

ARTICLE IX DUE PROCESS

Section 1         Any member of the FSIT who has been removed for any reason, excluding resignations, shall have access to due process to appeal the decision made by the Governing Board.

Section 2         The Governing Board shall provide a written notification of the decision for removal and reason for removal, effective date, and copy of due process procedure.

Section 3         The due process procedure shall include the following:

1. The individual removed from the FSIT must file an appeal, if any, in writing, to the Governing Board President within five (5) working days of removal to request an appeal.

2. The Governing Board President shall respond to the individual within five (5) working days of receipt of appeal to clarify the decision for removal.

3. If not satisfied, the individual may within five (5) working days request a hearing in the case before the full Governing Board to present witness testimony on the removed member's behalf, and to introduce any written documentation.

4. Within five (5) working days after receiving the written request for a hearing, the Governing Board shall schedule a special hearing within thirty (30) days.

5. The Governing Board shall consider any information or testimony presented to them in the appeal process and shall render a final decision to the individual, within fifteen ( 15) working days from the date of the hearing.

6. Neither the Governing Board, the FSIT, nor individual members of the FSIT, shall be held liable for any personal or legal cost incurred by the removed individual during the due process proceeding.