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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

Assessing Water Systems’ Financial Capacity: Financial Basics

Presenters:

Olga Morales-Sanchez, Western RCAP

Tim Grogg, Southeast RCAP

this webcast will cover
This webcast will cover:
  • Systems’ Financial Responsibilities
  • Contacts and Observations
  • Financial Planning Tools
  • Site Visit Questions to Ask & Documents to Request
  • Resources for More Information
types of water systems
Types of Water Systems
  • Three types of water systems
    • Public
    • Non-profit
    • Private
systems financial responsibilities
Systems’ Financial Responsibilities
  • Planning the systems financial future
  • Developing and approving the system’s annual budget
systems financial responsibilities cont
Systems’ Financial Responsibilities cont.
  • Generating revenues to cover expenses
  • Establishing a financial tracking system
  • Reviewing financial status monthly
site visit questions to ask documents to request
Site Visit Questions to Ask & Documents to Request

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

contacts observations
Contacts & Observations
  • Operation and Maintenance Contact – Water Operator
  • Financial contact – Billing Clerk, Administrator, Accountant, etc.
financial contact list
Financial Contact List
  • City Clerk or Utility Clerk
  • Bookkeeper, Accountant or Collector
  • Utility Manager or Public Works Director
  • City Manager
  • Utility Board Member or City Council
system observations
System Observations

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
system observations office staff
System Observations - Office Staff
  • 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
financial document checklist
Financial Document Checklist
  • Current Annual Budget
  • Latest Operating Statement – Revenues & Expenses
  • Latest Annual Audit
  • Rate Structure
  • Capital Improvement Budget – if any
  • Produced vs. Billed Water Comparison
financial planning tools
Financial Planning Tools
  • Annual Budget
  • Rate Structures
  • Policies and Procedures
  • Financial Controls
annual budget components
Annual Budget Components
  • Annual Operating Expenses
  • Required Reserves
  • Revenues to Cover Expenses & Reserves
operating expense budget
Operating Expense Budget
  • Are specific to the each utility
  • Line item expenses should make sense
  • Expenses should include water utility-related expenses only.
site visit questions to ask documents to request15
Site Visit Questions to Ask & Documents to Request

Does the operator have input into the budget?

required reserve accounts
Required Reserve Accounts
  • Operating Reserve compensates for cash flow variations.
  • Emergency Reserve is cash set aside for unplanned major maintenance or equipment failure.
reserve accounts cont
Reserve Accounts Cont.
  • 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.
instant polling question
Instant Polling Question

Which reserve account should fund scheduled meter replacements?

  • Emergency Reserve
  • Operating Reserve
  • Debt Reserve
  • Capital Improvement Reserve
site visit questions to ask documents to request19
Site Visit Questions to Ask & Documents to Request

Does the utility maintain and regularly fund reserve accounts ?

revenues
Revenues
  • Operating
    • Income from base charge
    • Income from water sales
  • Non – Operating
    • Meter fees
    • Connection fees
    • Cell phone tower rental, etc.
instant polling question21
Instant Polling Question

Fees are considered to be which type of revenue source?

  • Operating Revenue
  • Non-Operating Revenue
balancing the budget
Balancing the Budget

Revenues = Expenses + Reserves

site visit questions to ask documents to request23
Site Visit Questions to Ask & Documents to Request
  • Does the utility have a written rate structure?

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