(a) In lieu of one or more surety bonds, the deposit of school funds may be secured by the deposit with the board of school directors, or with any bank or trust company, other than the designated depository, within the Commonwealth which may be agreed upon, of bonds or other interest-bearing obligations of the United States, of the Commonwealth of Pennsylvania, or of any state of the United States, of the General State Authority, and other authorities created by the General Assembly of the Commonwealth of Pennsylvania for the payment of which the faith and credit of the authority is pledged, and the obligations of any municipality authority, if such obligations of the municipality authority are authorized investments for a fiduciary, pursuant to the act of May 26, 1949 (P.L. 1828),¹ known as the “Fiduciaries Investment Act of 1949”, and its amendments, or other bonds to be approved by the board: Provided, That in school districts of the second, third, and fourth classes, such securities shall be only bonds or other interest-bearing obligations of the United States, of this Commonwealth, of any state of the United States, or bonds of any county, city, borough, incorporated town, township, school district, or other political subdivision of this Commonwealth, or of any other state of the United States, or of the General State Authority, and other authorities created by the General Assembly of the Commonwealth of Pennsylvania for the payment of which the faith and credit of the authority is pledged, and the obligations of any municipality authority, if such obligations of the municipality authority are authorized investments for a fiduciary, pursuant to the act of May 26, 1949 (P.L. 1828), known as the “Fiduciaries Investment Act of 1949”, and its amendments, which has not at any time within the five years immediately preceding the date of the deposit of such bonds by the depository failed punctually to pay the matured principal and interest on all of its indebtedness.

(b) When collateral security is thus deposited in lieu of one or more surety bonds, the total amount of such bonds and obligations thus deposited, measured by their actual market value, less the total indebtedness of the school district to the depository and any amount that is insured under the provisions of section 623,² shall be equal to the amount of the deposits secured and twenty per centum in addition. All such bonds and obligations shall be accompanied by a proper assignment or power of attorney for their transfer. Such trust deposit, in the event of any depreciation in value, shall be maintained, on request in writing of the board of school directors, at the amount provided herein.