Pledge of Collateral
KRS 160.570 requires each board of education to appoint a bank, trust company, or savings and loan association to serve as its depository. The depository selected shall, before entering upon its duties, provide collateral in accordance with KRS 41.240 The depository shall be approved by the local board of education and by the commissioner of education. For a depository to be approved, a depository must provide a Pledge of Collateral. Pursuant to KRS 41.240, the depository institution should pledge or provide sufficient collateral which, together with FDIC insurance, equals or always exceeds the amount of public funds on deposit. In accordance with KRS 160.570, approval must be obtained by the local board of education in accordance with Kentucky Board of Education (KBE) administrative regulations and be approved by the Commissioner of Education.
The Pledge of Collateral Agreement (shown below) provides evidence between the board of education and the depository institution, of a pledge or provision of collateral in the event of failure or insolvency of the depository institution. Collateral includes securities or other obligations having an aggregate current face value or current quoted market value at least equal to the deposits or the provision of a surety bond(s) in favor of the district in an amount at least equal to the deposits, provided however, that amounts insured by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation need not be collateralized. This agreement shall be signed by both parties, that is (a) in writing, (b) approved by the board of directors of the depository institution or its loan committee, which approval must be reflected in the minutes of the board or committee, and (c) an official record of the depository institution. A board of education may enter into an agreement with its depository institution whereby the premium on collateral guaranteed by a surety company may be paid either by the board, or by the depository as evidenced in KRS 160.570 (2). If the district board of education pays the premium, the depository shall allow the board not less than two percent (2%) interest on its average daily or average monthly balances. The agreement should be retained in the district's board office.
Pledge of Collateral Agreement and example 2021
The Pledge of Collateral Web Based Form, must be completed online at the following link: SEEK District Data Submission. To access the SEEK web-based form, a username and password must be obtained from your district's Web Administrator. The instructions are shown below, along with a list of "Frequently Asked Questions" (FAQ's).
Pledge of Collateral Web Based Form Instructions Dated 8/6/21
Pledge of Collateral FAQ's Dated 2021
Web Based Form Reminders
The beginning date should coincide with the beginning fiscal year date of July 1, and the termination of the pledged collateral should coincide with the June 30 fiscal year-end. This information is to be submitted to KDE through the SEEK web-based form annually. The original hard copy of the collateral agreement and all legal documentation are to be retained in the local school district board office for audit purposes.
It is recommended districts continually monitor their fund balance for spikes to ensure adequate coverage, and consult with their board to establish a policy for the minimum amount of coverage, whether it be at 100% or 103%. If the district needs to make changes to the pledge of collateral information already submitted to KDE during the fiscal year, please call Jackie Chism at 502-564-3846, extension # 4445, or email Jackie.Chism@education.ky.gov or Gail Cox at extension # 4462 or email firstname.lastname@example.org.
June 1 - The SEEK window will open for submission by district.
July 1 - Collateral pledges are due annually to KDE through the SEEK application.
July 31 - Report sent to the Commissioner of Education for approval.
August - Final Approval Report posted to KDE website.
The Pledge of Collateral (Bond of Depository) Approval Reports are listed below which contain district approval from KDE's Commissioner of Education.
Pledge of Collateral Approval Report FY2021-2022 Dated September 2021
Jackie Chism at 502-564-3846 x4445, email@example.com
Gail Cox at 502-564-3846 x4462, firstname.lastname@example.org
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