Cash Reserves

AWWA Policy Statement on Cash Reserves

The American Water Works Association (AWWA) believes that utilities should establish cash reserve policies that identify adequate reserve levels, how those levels are established, and the intended use of each reserve. Properly designed reserve policies are beneficial to a utility and its customers and are an integral component of financial sustainability. Utilities should review the philosophy or approach used to establish reserve policies at least every five years. In establishing case reserve policies, utilities should consider operational and capital risks, level of risk tolerance, any governing financial requirements, future capital funding requirements, revenue volatility, and other ways to manage or mitigate financial risks. Utilities should monitor reserve levels at least annually to evaluate conformance with reserve policies and ensure they have the appropriate level of financial resources.

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

Adopted by the Executive Committee on October 24, 2018.