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Assessing Water Systems’ Financial Capacity: Financial Basics Presenters: Olga Morales-Sanchez, Western RCAP Tim Grogg, Southeast RCAP This webcast will cover: Systems’ Financial Responsibilities Contacts and Observations Financial Planning Tools

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Assessing water systems financial capacity financial basics l.jpg

Assessing Water Systems’ Financial Capacity: Financial Basics

Presenters:

Olga Morales-Sanchez, Western RCAP

Tim Grogg, Southeast RCAP


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This webcast will cover: Basics

  • Systems’ Financial Responsibilities

  • Contacts and Observations

  • Financial Planning Tools

  • Site Visit Questions to Ask & Documents to Request

  • Resources for More Information


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Types of Water Systems Basics

  • Three types of water systems

    • Public

    • Non-profit

    • Private


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Systems’ Financial Responsibilities Basics

  • Planning the systems financial future

  • Developing and approving the system’s annual budget


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Systems’ Financial Responsibilities cont. Basics

  • Generating revenues to cover expenses

  • Establishing a financial tracking system

  • Reviewing financial status monthly


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Site Visit Questions to Ask & BasicsDocuments to Request

Is the governing board or council provided with regular financial reports?


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Contacts & Observations Basics

  • Operation and Maintenance Contact – Water Operator

  • Financial contact – Billing Clerk, Administrator, Accountant, etc.


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Financial Contact List Basics

  • City Clerk or Utility Clerk

  • Bookkeeper, Accountant or Collector

  • Utility Manager or Public Works Director

  • City Manager

  • Utility Board Member or City Council


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System Observations Basics

If you are not already familiar with the water system, do the physical inspection first. This will allow you to determine:

  • The condition of the system

  • Adequacy of funds available for O & M

  • If operator time is sufficient for O & M


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System Observations - Office Staff Basics

  • Observe documents as listed in following sections

  • Determine the processes used to develop water system budget and set rates

  • Get a non-operators view of the financial health of the water utility

  • Provide contacts for future technical assistance for financial management


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Financial Document Checklist Basics

  • Current Annual Budget

  • Latest Operating Statement – Revenues & Expenses

  • Latest Annual Audit

  • Rate Structure

  • Capital Improvement Budget – if any

  • Produced vs. Billed Water Comparison


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Financial Planning Tools Basics

  • Annual Budget

  • Rate Structures

  • Policies and Procedures

  • Financial Controls


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Annual Budget Components Basics

  • Annual Operating Expenses

  • Required Reserves

  • Revenues to Cover Expenses & Reserves


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Operating Expense Budget Basics

  • Are specific to the each utility

  • Line item expenses should make sense

  • Expenses should include water utility-related expenses only.


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Site Visit Questions to Ask & BasicsDocuments to Request

Does the operator have input into the budget?


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Required Reserve Accounts Basics

  • Operating Reserve compensates for cash flow variations.

  • Emergency Reserve is cash set aside for unplanned major maintenance or equipment failure.


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Reserve Accounts BasicsCont.

  • Debt Service Reserve is in addition to a loan repayment.

  • Capital Improvement Reserve is for long-term equipment replacement and rehabilitation as well as for new projects and system expansion.


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Instant Polling Question Basics

Which reserve account should fund scheduled meter replacements?

  • Emergency Reserve

  • Operating Reserve

  • Debt Reserve

  • Capital Improvement Reserve


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Site Visit Questions to Ask & BasicsDocuments to Request

Does the utility maintain and regularly fund reserve accounts ?


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Revenues Basics

  • Operating

    • Income from base charge

    • Income from water sales

  • Non – Operating

    • Meter fees

    • Connection fees

    • Cell phone tower rental, etc.


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Instant Polling Question Basics

Fees are considered to be which type of revenue source?

  • Operating Revenue

  • Non-Operating Revenue


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Balancing the Budget Basics

Revenues = Expenses + Reserves


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Site Visit Questions to Ask & BasicsDocuments to Request

  • Does the utility have a written rate structure?

    2. Does the utility have written financial policies and procedures?



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