Pledge of Collateral
KRS 160.570 governs depositories for local boards of education. The statute requires each board of education to appoint a bank, trust company, or savings and loan association to serve as its depository. Section 2 of KRS 160.570, requires the depository, before entering its duties, provide collateral in accordance with KRS 41.240, approved by the local board of education in accordance with Kentucky Board of Education administrative regulations, and to be approved by the commissioner of KDE. The commissioner of KDE approves the pledge of collateral for each district annually.
The following are necessary steps to obtain the commissioner of KDE's approval of the Pledge of Collateral. This information is due to KDE by July 1 of each year:
1. A Pledge of Collateral must be arranged to cover those funds exceeding FDIC insurance. Bank account balances continuously fluctuate, and KRS 41.240 requires adequate coverage as of “the last business day of each quarter in which funds are deposited", however; KDE recommends districts continuously monitor their account balances to ensure all funds are covered.
2. Once a depository institution and the district's board of education agree upon the pledge to be provided, a written Pledge of Collateral Agreement is recommended by KDE. The written agreement provides evidence the board of education complied with statutes and regulations. Additionally, a written agreement will be necessary in the event of failure or insolvency of the depository institution. It is recommended the written agreement is signed by both parties, approved by the board of the depository institution or its loan committee, with approval reflected in the minutes of the board or committee, and an official record of the depository institution. Additionally, the board of education will need a copy of the pledge for auditing purposes. As a courtesy, KDE has created a sample Pledge of Collateral agreement for district to use or model an agreement after.
Pledge of Collateral Agreement and example 2021
3. In order to receive the approval from the commissioner of KDE, certain information from the pledge of collateral agreement must be submitted annually at SEEK District Data Submission. To access the SEEK web-based site, 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
Pledge of Collateral FAQ's Dated 2021
NOTE- In order to stay in compliance, districts must resubmit the information if the pledge of collateral agreement expires or changes during the fiscal year. KDE recommends districts continually monitor their bank balances 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%.
Important Dates:
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 Reports approval from KDE's Commissioner of Education are listed below:
Pledge of Collateral Approval Report FY2023-2024 Dated August 2023
Pledge of Collateral Approval Report FY2022-2023 Dated August 2022
For more
information contact:
Jackie Chism at 502-564-3846 x4445
jackie.chism@education.ky.gov
Office of Finance and Operations
Division of District Support
300 Sower Blvd, 4th Floor
Frankfort, KY 40601