Financing A Water Utility ( Financial Capacity )

6479 Words26 Pages
Financial capacity is at the heart of a utility’s ability to sustain the operations of the water system. Financial capacity for a water utility means having the financial resources needed to supply customers with safe drinking water in both the short and long term. Without sufficient revenues and adequate control of finances, it is very difficult to ensure continued delivery of safe and reliable water service to customers. The main indicators of financial capacity include:
• Budgeting and cost-tracking
• Reserves sufficient for emergencies, debt service, repairs and replacements and capital improvements
• Financial statements and financial indicators
• Adequate
…show more content…
EPA’s capacity development model, financial capacity is demonstrated in a water utility when it shows competence in its ability to:
• Collect sufficient revenues to meet both current and medium term expenses
• Maintain credit worthiness and ability to secure external funding, and
• Implement proper fiscal management and controls.

These factors which indicate financial capacity contribute to a water system’s fiscal sustainability. Financial capacity can also be improved by minimizing the cost of water production and distribution. For example, making treatment processes more efficient, attending to water losses, improving energy efficiency, having well-trained staff, and cooperating with other water utilities can improve the financial health of a water utility.
We all know people who operate on a month-to-month basis, feeling that they are doing well if they manage to pay their bills on time each month and then starting over next month. However, this is no way for a utility supplying something as basic and essential as drinking water to meet its obligations. Having financial capacity means knowing with reasonable certainty that the utility will be able to meet all current expenses, including those foreseeable in the next year, and is well situated to collect sufficient revenue to meet expenses in the long term. You meet your fiduciary responsibility as a utility board by managing finances in a way that allows the utility’s customers to have confidence that their
Get Access