FAQ’s for Depository Bonds
1)What is a Depository Bond?
A Depository Bond is a bond given by a bank to guarantee both the safety of funds, and their availability for withdrawal as indicated in the terms of deposit to the depositors. It also protects a public body's deposits if the bank becomes insolvent, and is normally used for municipalities and school districts.
2)How is it submitted to KDE?
It is submitted through the SEEK Application web form.
3)Who submits it to KDE?
It is submitted by whomever the district has designated, and they must have access to the SEEK Application.
4)When it is due to KDE?
It is due to KDE by July 1 of each year.
5)Do you have to figure the Penal Sum amount if you choose the 103% option?
Yes you do. The Penal Sum amount is your base amount to build the 103% collateral amount.
6)How, or who uses the data/information from it?
This information is audited for accuracy and reviewed for sufficient coverage by a CPA according to the auditing standards each fiscal year. It is also used when requested from the Legislative Research Committee (LRC), and other state or federal agencies.
7)Why is the accuracy of the data/information important?
If the information is not accurate,the district‘s account(s) may not be fully or completely protected, and could result in large monetary losses which could be financially devastating to the district.
8)What impact can wrong data/information or late submission have on the districts or KDE?
If the Penal Sum amount is not accurate, it will affect the amount of collateral that the bank has to make available to cover the districts account(s). If it is submitted late, this could cause a gap/loss in coverage between the late date submitted, and the approval of the bond by the Commissioner of Education, resulting in the district being uninsured for a period of time.
9)If the board approved our depository bond, but a signature is missing, do we have to wait to submit the information in the web form?
No, if the board has approved the bond, but a signature is missing, then you do not have to wait for the signature before submitting the information in the web form. The districts are toretain the original documentation in the board office.
10)If your account balance changes during the year, do you have to let KDE know?
If you chose Option #2 and your account balances increase/decrease by a significate amount, then you are recommended to contact KDE to have the window opened so that you can adjust your Penal Sum amounts and Collateral Market Value. If you chose Option #1, then you do not need to make adjustments with KDE. The bank is responsible to make sure that your account is covered.
11)If we do decide to change banks, can we amend our Depository Bond?
Yes, you will need to contact KDE to have the window opened to amend your Depository Bond information.
12)Can the district’s depository utilize the Insured Cash Sweep (ICS) service?
The use of this service would need to be authorized by the local school boards after consulting with their attorney. Further, KDE does not regulate or endorse the use of this service, and recommends you work with the board counsel to determine if this is an expenditure of funds that falls within the restricted scope of the Kentucky Constitution (restricting the expenditure of school funds for educational purposes, as described in opinion, OAG 85-100) and is also something the district wants to pursue.
13)WillKDE accept an FHLB letter of credit to pledge the deposits in lieu of securities?
Yes, per KRS 66.480, and 41.240, the FHLB letter of credit is acceptable.
Kentucky Department of Education
Office of Finance and Operation
Division of District Support
District Financial Management Branch
Dated: 5/15/17
KDE Use: F:\school_finance\Bond of Depository\Depository Bond FAQ’s
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