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WaterOperator.org Blog

Financial Management for Small Water Utilities

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Many small public water systems lack organized finances, with little to no budgeting or accounting, no long-term financial planning, and customer rates that are not adequate to cover expenses. Many small systems also need expensive repairs or upgrades that would be difficult to afford even if they had impeccable book-keeping. In recognition of this, the federal government and many national organizations provide small systems with resources to organize and improve their finances, as well as grants to help fund major projects.

We have 1712 resources (and counting) on Financial Management in our Documents Database that provide valuable information on this topic. You can search for documents on funding opportunities to build system resiliencybuilding a financially healthy water system, how to use the Drinking Water State Revolving Fund (DWSRF) to mitigate the impact of drought on drinking water systems or to address DBPs in drinking water, and many other useful guides that will help you to deliver safe and clean water to utility customers. 

To access the wealth of knowledge on Financial Management within our database just select "CATEGORY" in the dropdown then choose "Financial Management." Once you make that selection, a second dropdown will appear where you can choose "HOST," “TYPE,” or “STATE” to narrow the search even further. If you have a specific search term in mind, use the “Keyword Filter” search bar on the right side of the screen.

This is part of our A-Z for Operators series.

RCAP's A Drop of Knowledge: Recent Article Roundup #2

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A Drop of Knowledge is a monthly digital article from Rural Community Assistance Partnership (RCAP.) The articles focus on topics like wastewater, drinking water, policy, and infrastructure in rural America. It contains how-to’s, tips, and guidance from more than 300 technical assistance providers (TAPs) across the country. Some recent featured articles are linked below:

Looking for something else? Find more articles and subscribe to A Drop of Knowledge.

Free Program to Help Rural Entrepreneurs Thrive

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In 2021 the Rural Community Assistance Partnership (RCAP) launched the Open for Business program in response to the COVID-19 pandemic. The purpose of the program is to serve entrepreneurs across the country in launching and growing their business through the help of RCAP’s extensive network. 

The Open for Business program offers free tools designed to assist entrepreneurs looking for resources to enhance their business. The program’s hub has self-guided online workshops, live webinars on relevant topics for expanding your business, and one-on-one coaching from a team of professionals with a wide range of expertise. Register for one of their live webinars below:

The Open for Business hub also offers training resources that provide knowledge on some of the most used digital tools in business as well as financial assistance resources via a list of up-to-date government, non-profit, and private funding sources and loans for small businesses. 

For additional knowledge-building, the WaterOperator.org blog also regularly features content on running your water system like a business. Here are some examples:

Featured Video: Infusing Innovation into the DNA of Our Culture

There are many factors that drive the current utility model for wastewater operations. With traditional values in play, we have reached difficult economic and operational challenges. In order to address these challenges, we must adapt a new mindset and new utility model to push affordability for water customers, better equipment management, and increased compliancy.

Adapting a more innovative approach and mindset:
Our current utility practices suggest that our societal and business values coincide with "extraction, use, and waste disposal". This creates a motivation that is, at bare minimum, driven by public engagement, capital investment, and operations & maintenance. As a result our current water resources are being utilized inefficiently and ultimately running low. We must instead adapt a Resource Recovery business model for a circular economy. Focus must be shifted from regulatory compliance, utility impact, and traditional utility models to pivot toward ecological uplift, collective impact, and a transformative entrepreneurial business model. This new business model should include focus on resource recovery and watershed health as well as pump, plant, and pipe health.

The start of a new, innovative, and effective approach might be slow but can grow exponentially. Water organizations must start with efficiency and work their way to optimization, which will lead into investments for bigger ideas and new intellectual property such as smart meters, efficient pumps, proper monitoring equipment, better facilities, and so forth. Collective cooperation and corresponding mindsets will keep the industry on the same track with the addition of new water personnel and management turnover.

In this week’s featured video by the Water Research Foundation, Diane Taniguchi-Dennis, Deputy General Manager at Clean Water Services, presents a case study for how her organization is improving utility functionality through a culture of innovation.

Developing an Asset Management Program

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Asset management is a critical component to the short and long-term success of every water and wastewater utility regardless of size or system type. When a system understands the condition of its assets, in addition to present and future projected needs, the utility can make informed decisions about infrastructure operations, management, and investments. These decisions will minimize expenditures, equipment failures, and risk to public health while promoting reliability, resiliency, compliance, and customer satisfaction. Asset management moves utilities from reactive to proactive decision making and allows systems to get the most out of what they have.

If your facility has never developed an asset management plan or it’s been quite some time since you’ve last revised your plan, we’ve highlighted our favorite resources to get you back on track. A well-developed plan includes asset inventories, operation and maintenance tasks, emergency response and contingency planning, comprehensive financial plans, succession planning, and an understanding of current and future service level goals. Without addressing the technical, managerial, and financial management of your system, your plan will be incomplete. So without further ado, here’s our favorite resources to help you improve your understanding of asset management and develop your own program.

What is Asset Management?

Developing an Asset Management Plan

Writing Your Plan

Additional Help: Asset Assessment, Financial Planning, and Program Review

Developing a new plan can seem like an intimidating project, however utilities will ultimately improve their services and decision making capacity while saving time, resources, and money. If your system needs help developing or assessing a program, check out the EPA’s list of technical and financial assistance providers or contact WaterOperator.org to have help finding a provider. The EPA maintains a list of capacity development contacts that can answer any questions about specific requirements of your primacy agency.

To find additional information on asset management, visit our resource library. You can use the category filter to narrow down your search by topics in asset management, financial management, utility management, and more. Our library can also be filtered by resource type such as manuals, videos, or templates. The other filter options can refine your results to a specific host organization or state. Check out our tutorial to use the library to the best of its capabilities.

Featured Video - WaterClips: Financial Benchmarking for Water Utilities

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In this Featured Video, the Environmental Finance Center at UNC-Chapel Hill reviews the basics on how to properly monitor utility finances. Financial monitoring is crucial in making successful short-term and long-term management decisions to maintain optimal treatment levels, good customer service, and the longevity of your system. The financial benchmarking methods covered in this video include Current Ratio, Days Cash on Hand, Operating Ratio, and Debt Service Coverage Ratio. Implementing consistent benchmarking tools will ensure that your utility is working to cover the true system costs while planning for infrastructure depreciation and unexpected expenses.