Financing, Accounting and Rates

AWWA Policy Statement on Financing, Accounting and Rates

The American Water Works Association (AWWA) believes that the public can best be provided water and wastewater services by self-sustaining enterprises adequately supported by cost-of-service rates and charges based on sound economic, accounting, management, and financial principles.

Utilities should not implement policies or practices that compromise the long-term financial integrity of the utility or impair its ability to provide safe, high quality, and reliable service to customers.

Utilities should follow the generally accepted accounting principles and adopt a standard uniform system of accounts, modified as necessary to meet the requirements of legislative, judicial, or regulatory bodies. Internal controls should ensure that the financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of the utility. In addition to having robust internal controls, financially strong utilities should also have management controls to guide and strategically align decisions and resources.

Revenues from water and wastewater rates and charges should be sufficient to pay for annual operation and maintenance expenses, fund and finance capital costs, maintain sufficient working capital and required reserves, and achieve desired financial performance metrics. Maintenance and capital costs should include the support of best management practices, such as having an asset management program that preserves utility assets at desired service levels.

Rates should be designed to distribute the cost of service equitably among each type and class of service. Alternative rate structures that achieve certain other objectives such as affordability and water conservation may be considered in some limited situations.

Utilities should provide information on a regular basis (at least annually) to customers, the financial community, and the general public about the utility’s financial condition and the revenues necessary to provide service and to maintain utility assets on a sustained basis.

Utilities should account for and maintain their funds in separate accounts from other governmental or owning entity operations. Water and wastewater utility funds should not be diverted to uses unrelated to the utility’s services. Reasonable and defensible taxes, payments in lieu of taxes, and payments for services rendered to the utility by a local government or other divisions of the owning entity may be included in the utility’s revenue requirements.

Practices specified in this policy statement are consistent with all other pertinent AWWA policy statements.

Adopted by the Board of Directors Executive Committee Jan. 25, 1965, and revised Jan. 31, 1982, and reaffirmed Jan. 25, 1987, and revised Jan. 26, 1992, and June 21, 1998, and Jan. 16, 2005 and Jan. 17, 2010, and June 7, 2015 and revised April 20, 2020, revised March 27, 2025.