What Are the Two Basic Security Structures for Municipal Bonds?

It is correct that municipal bonds come in two distinct structures that determine how investors are repaid—and true, each carries unique audit and compliance considerations. These are General Obligation (GO) Bonds and Revenue Bonds. Recognizing the distinctions presents assistance to issuers in fully aligning with audit requirements for municipal bonds and provides investors with insight into financial security abd risk elements.

1. General Obligation Bonds

GO Bonds are supported by the full taxing power of the issuing government. It covers property or income taxes. They are generally leveraged for community projects like schools or parks as well as public buildings. The key features can be outlined as below:

• Backed by the issuer's taxing authority
• Generally necessitate voter approval
• Leveraged for fundamental public services

Audit impact: A municipal bond financial audit for GO Bonds simply focuses on confirming that tax revenues are sufficient to fulfill debt obligations. Auditors assess how funds are allocated and make sure that all reports fully align with applicable SEC municipal bond rules.

2. Revenue Bonds

Revenue Bonds are linked directly with income from specific projects—think toll roads or water utilities as well as stadiums. Rather than tax money, repayment varies in line with revenue performance. The features of revenue bonds can be outlined as below:

• Supported by earnings from the funded project
• No voter approval is necessary
• Common for infrastructure or enterprise developments

Audit impact: Auditors examine whether project income consistently covers debt service. If revenues fall short, this could generate disclosure responsibilities in accordance with municipal bond continuing disclosure rules and influence tax-exempt bond compliance if proceeds are not properly used.

These Structures Matter

Whether issuing tax-backed GO Bonds or income-based Revenue Bonds, Dimov Audit assists public entities in satisfying all audit requirements for municipal bonds—from financial reviews to continuing disclosure as well as compliance assessments. Contact us today for financial transparency.