Series 7: 3.5.2.2 Flow Of Funds Requirement

3.5.2.2  Flow of Funds Requirement

The flow of funds requirement is a statement showing the process by which pledged revenue is distributed into the various accounts established by the bond indenture. Funds might be distributed first to either the municipality’s debt service fund or its operations and maintenance expenses. A gross revenue pledge allocates funds to debt service before operations and maintenance or any other expenses are paid. A net revenue pledge requires that funds flow first into the O&M expenses fund before any funds are allocated to debt service.

After the exp