Which condition is needed before issuing RANs based on audits?

The condition of having a positive net position is essential before issuing Revenue Anticipation Notes (RANs) based on audits. A positive net position indicates that the entity has more assets than liabilities, reflecting a solid financial foundation. This condition provides assurance to investors and stakeholders that the municipality is managing its finances effectively and is in a stable position to meet its future obligations.

When a municipality has a positive net position, it can be viewed as a signal of fiscal health, which is crucial when considering the issuance of RANs. These notes are typically used to manage cash flow shortages and are backed by future revenues. If the municipality does not have a positive net position, it could be seen as a higher risk to funders and investors, potentially increasing borrowing costs or making it challenging to issue these notes.

While positive cash flow, high reserve levels, and continued revenue growth are beneficial factors for a municipality, they do not provide the same comprehensive view of the overall fiscal health as a positive net position. Hence, it is the positive net position that serves as the most critical condition for the successful issuance of RANs based on audits.