9.2.4 Debt Service Funds

9.2.4 Debt Service Funds

A debt service fund (DSF), often referred to as a “revenue fund,” is typically composed of interest, principal, and/or redemption accounts, and is intended to facilitate proper matching of revenues and debt service obligations. In the past, and typically for revenue bonds, DSFs were often required to be funded in advance of actual principal and interest payment dates, typically on a monthly basis (for example, one-sixth of the next interest requirement and one-twelfth of the next principal requirement). This advance funding pattern effectively imposes a relatively short maturity (and commensurately low yields) on DSF investments. This advance funding approach is uncommon in general obligations and lease obligations.