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 utility accounting, management and ﬁnancial principles.
Utilities should not implement any policy or practice that compromise the long-term ﬁnancial integrity of the utility or its ability to provide safe, high quality, and reliable service to customers.
Utilities should follow the generally accepted national accounting principles of their country 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 service charges, user rates, and capital charges should be sufﬁcient to pay for annual operation and maintenance expenses, financing of capital costs, maintenance of working capital and required reserves, and achievement of defined financial performance metrics. Maintenance and capital costs should include the support of 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. Non-cost of service rate-setting practices that achieve affordability objectives may be appropriate in some situations.
Utilities should provide information annually to customers, the financial community, and the general public about the financial condition of the utility 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 water or wastewater utility services. Reasonable 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 after taking into account the contribution for ﬁre protection and other services furnished by the utility to the local government or to other divisions of the owning entity.
Practices specified in this policy statement are consistent with all other pertinent AWWA policy statements.
Adopted by the Board of Directors 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.