Asset Management: 

A Handbook for Small Water 

Systems 

One of the Simple Tools for Effective 

Performance (STEP) Guide Series 
Office of Water (4606M) 

EPA 816-R-03-016 

www.epa.gov/safewater 

September 2003 

Printed on Recycled Paper 
Contents 

Is This Guide for Me? ......................................................................................................................................................................................... 2


What Will I Learn? .............................................................................................................................................................................................. 3


How Can Asset Management Help Me? ............................................................................................................................................................. 4


What Is Asset Management?.............................................................................................................................................................................. 5


How Does Asset Management Relate to Strategic Planning?............................................................................................................................ 6


What Is the Asset Management Process? ......................................................................................................................................................... 7


Step #1 – How Do I Inventory My Assets?.......................................................................................................................................................... 8


Introduction to the System Inventory Worksheet .................................................................................................................................... 9


EXAMPLE System Inventory Worksheet .............................................................................................................................................. 12


Step #2 – How Do I Prioritize My Assets? ........................................................................................................................................................ 14


Introduction to the Prioritization Worksheet .......................................................................................................................................... 15


EXAMPLE Prioritization Worksheet ...................................................................................................................................................... 18


Step #3 – How Do I Plan for the Future? .......................................................................................................................................................... 20


Introduction to the Required Reserve Worksheet ................................................................................................................................ 21


EXAMPLE Required Reserve Worksheet............................................................................................................................................. 24


Step #4 – How Do I Carry Out This Plan? ........................................................................................................................................................ 26


Introduction to the Budgeting Worksheet ............................................................................................................................................. 27


EXAMPLE Budgeting Worksheet ......................................................................................................................................................... 30


Step #5 – What Should I Do Next? ................................................................................................................................................................... 32


Appendix A: Worksheets................................................................................................................................................................................... 33


Appendix B: Sources of Financial Assistance to Drinking Water Systems ...................................................................................................... 37


Appendix C: Introduction to GASB 34 .............................................................................................................................................................. 39


Appendix D: Sources for More Information on Asset Management ................................................................................................................. 41


Appendix E: Safe Drinking Water Act Primacy Agencies ................................................................................................................................. 42


Appendix F: Tribal Contacts .............................................................................................................................................................................. 47


Appendix G: Other STEP Guide Documents .................................................................................................................................................... 48

Is This Guide for Me? 

This guide is designed for owners and operators of small community water systems (CWSs). CWSs include all systems (both publicly and privately 

owned) with at least 25 year-round residential customers or 15 year-round service connections. Typical systems that may find this guide useful include: 

 Small towns  Tribal systems 

 Rural water districts 

This guide presents basic concepts of asset management and provides the tools to develop an asset management plan. Very small CWSs may have 

some difficulty in completing some of the worksheets included in this booklet, while medium CWSs may find the worksheets too simple for their needs. 

Due to each system’s particular circumstances, the time and effort needed to develop the plan will vary. Building a team, made up of your operator, board 

members, owners, assistance providers, and state drinking water staff, will help you develop an effective and complete plan. 

State and Regional Tribal Capacity Development Program Coordinators are available to help you understand the concepts covered in this guide and 

complete the accompanying worksheets. They can also provide additional asset management tools and offer resources to help implement an asset 

management plan. Contact your Capacity Development Program for more information. Contact information is provided in Appendices E and F. 

Additional copies of this guide may be obtained by calling the Safe Drinking Water Hotline at (800) 426-4791 and requesting document number EPA 

816-R-03-16. You may also download the guide from EPA's Safe Drinking Water Website at www.epa.gov/safewater/smallsys/ssinfo.htm. 

EPA has developed a simpler asset management booklet for homeowners' associations and manufactured home communities called "Taking Stock 

of Your Water System" (EPA 816-K-03-002). You can obtain this booklet by calling the Safe Drinking Water Hotline or downloading it from EPA's 

Safe Drinking Water Website at www.epa.gov/safewater/smallsys/ssinfo.htm. 

2

What Will I Learn? 

As a drinking water system owner or operator, your most important job is delivering safe and secure drinking water to your customers. Part of providing 

safe and secure drinking water is taking care of your system’s facilities and equipment and planning for any needed rehabilitations and replacements. An 

asset management plan will help you meet these goals in an efficient and cost-effective manner. 

This guide will help you by providing information about: 

 How asset management can help improve your system’s financial health and ability to 

provide safe drinking water. 

 How asset management fits into the development of an overall plan for your system’s 

future (i.e., strategic planning). 

 How to complete a five-step asset management process including: 

< Conducting a thorough asset inventory. 

< Prioritizing the rehabilitation and replacement of your assets. 

A water tower that has exceeded its useful life! 

< Developing an annual estimate of needed reserves and an annual budget. 

< Implementing the asset management plan. 

< Reviewing and revising the asset management plan. 

The worksheets and other information in this guide will also help you begin to develop an overall strategy for your system. Using this guide along with 

EPA’s “Strategic Planning: A Handbook for Small Water Systems” (EPA 816-R-03-015) will help you develop, implement, and receive optimal benefit from 

an asset management plan that fits in with your system’s overall strategy. 

3

How Can Asset Management Help Me?


Applying the practices recommended in this guidebook will help you improve the management of 

your system by: 

 Increasing your knowledge of your system, which will allow you to make better financial 

decisions. This is useful information when considering options to address various system 

challenges such as meeting regulatory requirements or upgrading system security. 

 Reducing system “down-time” and the number of emergency repairs, since you will have 

planned for the replacement and rehabilitation of your assets. 

 Prioritizing rehabilitation and replacement needs and providing time to research cost-effective 

alternatives. 

 Showing investors and the public that you are using their money effectively and efficiently, 

which may make them more likely to increase investment or tolerate rate increases. 

 Giving you greater access to financial assistance. Some funding sources give applicants 

extra credit (higher priority ratings) for having an asset management plan or a capital 

improvement plan. 

For additional information on funding sources, see Appendix B. EPA’s Sources of Technical and 

Financial Assistance Workbook (EPA 816-K-02-005), which you can obtain by calling the Safe 

Drinking Water Hotline ((800) 426-4791), provides additional information. Additional resources, 

such as electronic programs, documents, and a listing of organizations, are provided in Appendix 

D. Your State or Regional Tribal Capacity Development Program can also provide assistance to 

help you develop and implement an asset management plan. Contact information is provided in 

Appendices E and F. 

4

What Is Asset Management? 

Asset management is a planning process that ensures that you get the most value from each of 

your assets1 and have the financial resources to rehabilitate and replace them when necessary. 

Asset management also includes developing a plan to reduce costs while increasing the efficiency 

and the reliability of your assets. Successful asset management depends on knowing about your 

system’s assets and regularly communicating with management and customers about your 

system’s future needs. 

You should thoroughly review your asset management plan at least once a year, noting any 

relevant changes. Throughout the year, you should keep a running list of items to consider or 

include in the annual update. 

What Is the Governmental Accounting Standards Board's Statement #34? 

The Governmental Accounting Standards Board's Statement #34 (GASB 34) revises several accounting and financial reporting practices for state 

and local governmental entities including publicly-owned water systems. If your water system is publicly owned, you will need to follow GASB 34 

requirements to obtain a "clean opinion" (i.e., a good credit rating) from an auditor. Without a clean opinion, you may face higher interest rates on 

loans and bonds and may be more closely scrutinized by regulators and public officials. Following GASB 34 standards will require publicly-owned 

water systems to report the value of infrastructure assets and the cost of deferred maintenance. An accurate and up-to-date asset management 

plan will help you comply with this requirement. See Appendix C for more information on GASB 34. 

Note: If you operate a privately owned water system, you do not need to comply with GASB 34. However, complying with generally accepted 

accounting principles (GAAP) makes sense for any system. Visit the Financial Accounting Standards Board (FASB) at www.fasb.org for more 

information on GAAP for private entities. 

1 In this guide, an “asset” is any building, tool, piece of equipment, furniture, pipe, or machinery used in the operation of your system. 

5

How Does Asset Management Relate to Strategic Planning? 

The U.S. drinking water industry faces many key challenges in the 21st century, such as replacing aging infrastructure, addressing security concerns, and 

complying with new regulations. Depending on the circumstances of your system, you may need to make changes to the operation of your system. 

Strategic planning is a management concept that helps you address and prepare for both anticipated and unexpected problems. Strategic planning 

utilizes asset management to evaluate your system’s current physical situation, and it also evaluates your system’s financial and managerial situation. It 

requires you to make fundamental decisions about your water system’s purpose, structure, and functions. 

In order to make Strategic Planning work for your water system, you need to collect the information that will allow you to make intelligent, informed 

decisions about your system’s future. Developing an asset management plan can provide you with some of that information. For more information on 

Strategic Planning, see EPA’s Strategic Planning Workbook (EPA 816-R-03-015), which you can obtain by calling the Safe Drinking Water Hotline ((800) 

426-4791), visit the Alliance for Nonprofit Management at http://www.allianceonline.org/faqs.html, or contact your State or Regional Tribal Capacity 

Development Program Coordinator. 

6

What Is the Asset Management Process?


Asset management consists of the following five steps: 

1. 

2. 

3. 

4. 

5. 

Taking an inventory. Before you can manage your assets, you need to know what assets you have and


what condition they are in. This information will help you schedule rehabilitations and replacements of


your assets.


Prioritizing your assets. Your water system probably has a limited budget. Prioritizing your assets will


ensure that you allocate funds to the rehabilitation or replacement of your most important assets.


Developing an asset management plan. Planning for the rehabilitation and replacement of your assets


includes estimating how much money you will need each year to maintain the operation of your system


each year. This includes developing a budget and calculating your required reserves.


Implementing your asset management plan. Once you have determined how much money you will


have to set aside each year and how much additional funding (if any) you will need to match that amount,


you need to work with your management and customers and with regulators to carry out your plan and


ensure that you have the technical and financial means to deliver safe water to your customers.


Reviewing and revising your asset management plan. Once you have developed an asset


management plan, do not stick it in a drawer and forget about it! Your asset management plan should be used to help you shape your operations.


It is a flexible document that should evolve as you gain more information and as priorities shift.


This guidebook provides information and worksheets that will help you complete all five steps. As you work your way through this guidebook, you should 

remember that the suggestions provided and the results you develop based on the worksheets are not set in stone. You should adjust your plan based on 

your own experience and the particular characteristics of your system. In addition, you should reevaluate your plan every year, updating each of the 

worksheets provided in this booklet. 

Contact your State or Regional Tribal Capacity Development Program Coordinator for more information or assistance. Other sources of information on 

asset management are listed in Appendix D of this guide. 

7

Step #1 – How Do I Inventory My Assets? 

Before you can manage your assets, you need to know what you have, what condition 

it is in, and how much longer you expect it to last. To complete an inventory, list all your 

assets and collect the following information for each: 

1. Condition 

2. Age 

3. Service history 

4. Useful life 

The worksheets on the following pages will help you develop an asset inventory and 

keep track of important information. Detailed instructions are provided. 

You may want to keep track of your assets on a computer spreadsheet or use custom 

software. Appendix D includes information on electronic programs you may want to 

use. 

Inventorying your assets can be an intensive job. Get the best information that you can, but don’t get bogged down in this step and use estimates where 

needed. If you keep up with an asset management program, new information will become available as assets get replaced or rehabilitated, and your 

inventory of assets will improve. 

Remember! 

The worksheets in this guide could contain sensitive information about your water system. Make sure you 

store these worksheets, as well as all other asset information about your system, in a secure location. 

8

Introduction to the System Inventory 

Worksheet 

The following System Inventory Worksheet will help you: 

 Identify all of your system’s assets; 

 Record the condition of your assets; 

 Record the service history of your assets; 

 Determine your assets’ adjusted useful lives; 

 Record your assets’ ages; and, 

 Estimate the remaining useful life of each of your assets. Usually, there are two steps to 

estimating useful life: 

1. Determine the expected useful life by using the manufacturer’s 

recommendations or the estimates provided in the box to the right. Adjust these 

numbers based on the specific conditions and experiences of your system. 

2. Calculate an adjusted useful life by taking into account the service history and 

current condition of your asset. 

Two copies of the worksheet are provided. The first copy is followed by instructions that will 

help you understand how to complete it. The second worksheet is an example. Appendix A 

has blank worksheets that you can photocopy and use. 

Estimated Useful Lives 

A sset

E xpected Useful

L ife (in years)

I ntake Structures 3 5-4

W ells and Springs 2 5-3

G alleries and Tunnels 3 0-4

C hlorination Equipment 1 0-1

O ther Treatment Equipment 1 0-1

S torage Tanks 3 0-6

P umps 1 0-1

B uildings 3 0-6

E lectrical Systems 7 -1

T ransmission Mains 3 5-4

D istribution Pipes 3 5-4

V alves 3 5-4

B low-off Valves 3 5-4

B ackflow Prevention 3 5-4

M eters 1 0-1

S ervice Lines 3 0-5

H ydrants 4 0-6

L ab/Monitoring Equipment 5 -

T ools and Shop Equipment 1 0-1

L andscaping/Grading 4 0-6

O ffice Furniture/Supplies 1 

C omputers

T ransportation Equipment 1 

N ote: These numbers are ranges of expected

u seful lives drawn from a variety of sources. The

r anges assume that assets have been properly

m aintained.

5

5

0

5

5

0

5

0

0

0

0

0

0

0

5

0

0

7

5

0

0

5 

0

9

S ystem Inventory Worksheet

D ate Worksheet Completed/Updated:

A sset E xpected

U seful Life

C ondition S ervice Histor

A djusted

U seful Life

A ge

R emaining

U seful Life

1

2 5 3 4 6 7 8

y

10

Using the System Inventory Worksheet 

This section presents instructions for completing the System Inventory Worksheet. Each step presented here corresponds to a numbered section of the 

sample worksheet on page 10. 

Step #1 

Step #2 

Step #3 

Step #4 

Step #5 

Enter the date. 

 Circle whether you are completing or updating the 

worksheet and fill in the date. You should update this 

worksheet at least once a year. You can either make 

minor adjustments to the worksheet as the condition of 

your assets change, or start a new worksheet each 

year. 

Identify your assets. 

 Write in each of your system’s assets. Be as specific 

as possible by providing location, manufacturer, or 

some other identifier for each asset. List separately 

assets made of different materials or installed at 

different times. For example, you might list a section of 

your distribution system as “10-inch PVC on Main St.” 

You can make a copy of this worksheet if you need 

more room to list assets. 

Fill in expected useful life. 

 Use the manufacturer’s recommendation or the list 

provided in the box on page 9 to enter the expected 

useful life for each asset. 

Describe assets’ condition. 

 Briefly describe the condition of each asset. Focus 

especially on conditions that may influence the useful 

life (for example, rust or broken parts). 

Describe service history. 

 Briefly describe the service history of each asset. 

Include routine maintenance activities as well as any 

repairs and rehabilitations. List how often you have 

made repairs and rehabilitations. 

Estimate the adjusted useful life for each asset. 

Step #6  Using the Expected Useful Life (step 3) as a guide, 

estimate the adjusted useful life for each of your assets 

by considering its current condition (step 4) and its 

service history (step 5). 

 If your asset is in poor condition, has not been properly 

maintained, or faces other challenges (poor water or 

soil quality, excessive use, etc.), then the adjusted 

useful life is likely to be less than the lower end of the 

expected useful life range. 

 If your asset is in good condition, has been properly 

maintained, and faces average water quality, then you 

can use the average useful life value. However, you 

may want to use the lower end of the range to be more 

conservative and help ensure that you are prepared to 

replace the asset. 

Record age. 

Step #7  For each asset, fill in how long the asset has been in 

use. If the asset has been previously used by another 

system, you should list the total age, not just the length 

of time your system has used it. 

Calculate the remaining useful life. 

Step #8  For each asset, calculate the remaining useful life by 

subtracting its age (step 7) from its adjusted useful life 

(step 6). 

11

S ystem Inventory Worksheet

D ate Worksheet Completed/Updated:

A sset E xpected

U seful Life

C ondition S ervice Histor

A djusted

U seful Life

A ge

R emaining

U seful Life

Example 

8/14/02 

Well 1 (1993) 

Well 1 pump 

Well 2 (1993) 

Well 2 pump 

Pumphouse (1993) 

Electrical 

components 

Chlorinator (1993) 

Storage tank 1 (1993) 

Storage tank 2 (1993) 

Storage tank 3 (2000) 

Distribution System: 

2-inch (PVC) 

4-inch (PVC) 

6-inch (PVC) 

Valves (45) 

Hydrants (15) 

30 

40 

40 

40 

10 

10 

30 

10 

30 

10 

40 

40 

60 

60 

60 

Good 

Good 

Good 

Good 

Good 

Some corrosion 

Good 

Good 

Good 

Almost new 

Unknown 

Unknown 

Unknown 

Unknown 

Unknown 

Rehab (1996) 

Rehab (1998) 

Rehab (1994) 

Rehab (1998) 

Rehab (2000) -

$17,000 

Rehab (2000) -

$17,000 

6 valves don’t work 

Repair breaks (2/year) 

30 

40 

40 

40 

5 

10 

30 

10 

30 

10 

40 

40 

60 

60 

60 

9 

2 

9 

9 

3 

9 

9 

9 

9 

9 

9 

9 

9 

9 

9 

21 

38 

31 

31 

2 

1 

21 

1 

21 

1 

11 

11 

51 

51 

51 

y

12

Explanation of Example System Inventory Worksheet 

A small, municipally-owned water system serving 750 service connections has decided to develop an asset management plan. A neighboring water 

system recently negotiated very good interest rates on a loan to fund distribution pipe replacement due in part to their asset management plan. This 

inspired the managers of this system to develop their own asset management plan. 

In addition, the municipality plans to begin significant road work sometime in the next five years. The water system managers have been asked to 

determine whether any of the pipes under the roads scheduled to be repaired will need to be replaced in that time frame. 

As a first step, the system operator develops a list of the system’s assets and evaluates the condition of each asset. To differentiate the assets, the 

operator includes the year that some of the assets were installed. Although he does not have comprehensive information about every asset on the list, 

there is enough information to begin assessing the overall health of the system. 

Note that although the estimated useful life for a chlorinator is 10 years (see the box on page 9), the operator of this system knows that they had to 

replace their previous chlorinator after only 5 years. He adjusts the useful life for the chlorinator from the estimated 10 years to a more conservative 5 

years. He uses the manufacturers’ recommendations as the useful life for the hydrants, valves, and PVC pipes. 

Upon completing the System Inventory Worksheet, the system managers notice that they will have to replace a significant number of their assets starting 

next year and then about every ten years (11, 21, and 31 years from now). They begin to consider whether spacing the projects out over two or three 

years is possible, or if they will need to replace these assets in the same year. 

In addition to the System Inventory Worksheet, the other worksheets in this guide will help the system managers prioritize the assets and determine how 

much money they will need to set aside each year to meet the financial demands of replacing them when necessary. 

13

Step #2 – How Do I Prioritize My Assets?


Once you have inventoried your assets, your next step will be to prioritize your assets based on 

their importance to your system. Prioritization means ranking your system’s assets to help you 

decide how to allocate resources. Factors involved in prioritization include: 

 How soon will you have to replace an asset (its remaining useful life). 

 How important the asset is to the provision of safe drinking water (its impact on public health). 

 How important the asset is to the operation of the system (can other assets do the same job?). 

A water system is often one of many responsibilities of a community or municipality. Other factors 

can influence which water system projects are funded and when they are completed. For 

example, in many small communities, distribution system rehabilitation and replacement is tied to 

the road repair schedule and budgeting. Developing an asset management plan and prioritizing 

your assets will help you determine when you should replace your assets so as to not jeopardize 

water delivery, but you may have to work with your community or municipality to develop a 

replacement schedule that works for all parties. 

Ideally, an asset management plan will help you forecast your financial needs well into the future 

and develop a rehabilitation and replacement schedule appropriate for your system’s priorities. 

An Example Prioritization 

Scheme 

There is no one correct way to prioritize your 

assets. Most often, assets are prioritized based 

on their remaining useful life. However, this is 

not the only way to prioritize your assets and 

may not be the best way for your system. 

One possible prioritization scheme, in order 

from most critical assets to the least critical: 

1. Existing threat to public health, safety, or 

environment; 

2. Potential public health, safety, or 

environmental concern; 

3. Internal safety concern or public nuisance; 

4. Improved system operations & 

maintenance (O&M) efficiency; and 

5. It would be nice to have... 

14

Introduction to the 

Prioritization Worksheet 

The following Prioritization Worksheet will help you: 

 Consider the redundancy and importance of each of your system’s 

assets; and, 

 Prioritize your assets based on their remaining useful life, redundancy, 

and importance. 

Two copies of the worksheet are provided. The first copy is followed by 

instructions that will help you understand how to complete it. The second 

worksheet is an example. Appendix A has blank worksheets that you can 

photocopy and use. 

Things to Keep In Mind 

 Assets with a shorter remaining useful life should have a 

higher priority, as you will have to replace these assets 

sooner. 

 Assets that are more important to your ability to deliver 

safe water should have a higher priority, because your 

water system relies on these assets to deliver safe water. 

 Assets for which there is less redundancy should have a 

higher priority, because your system will have trouble 

continuing to operate without them. 

 The “big picture,” or how your community is planning 

development, is important to your operating plans and your 

prioritization decisions. For example, if the replacement of 

distribution system pipes is tied to road repairs, and the 

road repairs are delayed, water system improvements will 

also be delayed. 

 Any engineering master plans, capital improvement plans 

(CIPs), or comprehensive performance evaluations (CPEs) 

done for your system. 

15

P rioritization Worksheet

D ate Worksheet Completed/Updated:

A sset R emaining

U seful Life

I mportance R edundanc

P riority

( 1 is high)

1

2 4 5 6

y

3

16

Using the Prioritization Worksheet 

This section presents instructions for completing the Prioritization Worksheet. Each step presented here corresponds to a numbered section of the 

sample worksheet on page 16. 

Step #1 

Step #2 

Step #3 

Step #4 

Step #5 

Enter the date. 

 Circle whether you are completing or updating the 

worksheet and fill in the date. You should update this 

worksheet at least every year. You can either make 

minor adjustments to the worksheet as your priorities 

change or problems are addressed, or start a new 

worksheet each year. 

List your assets. 

 Copy your list of assets from step 2 of the System 

Inventory Worksheet. 

Enter assets’ remaining useful life. 

 For each of your assets, copy the remaining useful life 

from step 8 of the System Inventory Worksheet. 

Describe assets’ importance. 

 Briefly describe the importance of each of the assets to 

the operation of your system and the protection of 

public health. Assets that are required in order to keep 

the system running are usually more important than 

those that just make operation more efficient. 

Describe assets’ redundancy.  Briefly describe the redundancy of each of the assets. 

Are there assets that can do the same job, even if they 

cannot do it as well? 

Evaluate assets’ priority. 

Step #6  Considering remaining useful life, importance, 

redundancy, and any other important factors, rank your 

assets in terms of how important it is to reserve money 

for them. Write “1” next to the asset with the highest 

priority, “2” next to the asset with the next highest 

priority, and so on. You may find that you have more 

than one asset with the same level of priority. You can 

assign the same ranking to all assets with the same 

priority. 

 Assets with a shorter remaining useful life should 

have a higher priority (lower number) because you will 

need to rehabilitate or replace them relatively soon. 

 Assets that are more important to your ability to 

deliver safe water should have a high priority (lower 

number), because of public health protection goals. 

 Assets for which there is less redundancy should 

have a high priority (lower number), because your 

system will have trouble continuing to operate without 

them. 

17

P rioritization Worksheet

D ate Worksheet Completed/Updated:

A sset R emaining

U seful Life

I mportance R edundanc

P riority

( 1 is high)

EXAMPLE 

8/14/02

Well 1 (1993)

Well 1 pump

Well 2 (1993)

Well 2 pump

Pumphouse (1993)

Electrical components

Chlorinator (1993)

Storage tank 1 (1993)

Storage tank 2 (1993)

Storage tank 3 (2000)

Distribution System:

2-inch (PVC)

4-inch (PVC)

6-inch (PVC)

Valves (45)

Hydrants (15)

21

38

31

31

2

1

21

1

21

1

11

11

51

51

51

Other well, but need backup 6

6

6

6

1

2

6

3

6

3

5

4

6

6

6

Needed for service

Needed for service

Needed for service

Needed for service

Needed for service

Needed for control

Mandatory

Need for fire flow and demand

Needed for delivery

Needed for isolation

Needed for public safety

Need for fire flow and demand

Need for fire flow and demand

Needed for delivery

No redundancy - corrosion

No redundancy - need backup

Other tanks

Other hydrants

Other valves, but some are

out of service

No redundancy

Needed for delivery

Other well, but need backup

Other well, but need backup

Other well, but need backup

Other well, but need backup

Other tanks

Other tanks

No redundancy

No redundancy

y

18

Explanation of Example Prioritization Worksheet 

Once the water system operator completes the System Inventory Worksheet (see page 12), he begins to work with the system managers to prioritize the 

assets. A number of assets will require attention within the next five years. These assets are given the highest priority. 

Even though the chlorinator has a longer remaining useful life than both well pumps and the electrical components, the system managers have assigned 

the chlorinator the highest priority. The delivery of safe drinking water and the system’s compliance with drinking water regulations depends on the 

chlorinator. The managers have also assigned a high priority to both well pumps and the electrical components of the pumphouse since consistent and 

adequate water delivery will be in jeopardy if these items are not replaced. 

Deciding whether to assign the chlorinator, the pumps, or the electrical components a higher priority was a difficult decision, as all are integral to the 

operation of the water system. The managers know they will have to replace all of these assets if they expect to continue to provide their customers with 

safe drinking water. By completing the prioritization worksheet, however, the managers gave themselves some time to properly evaluate the situation, 

collect the necessary resources, and replace all critical assets according to a schedule that will work for the system. 

The Prioritization Worksheet also helps the managers forecast future needs and allocate resources. The managers are able to inform the municipality 

that the distribution pipes will not require replacement for another 50 years. By not replacing the pipes before the end of their useful lives, the funds that 

might have been allotted to the pipe-replacing project can now be assigned to more critical projects, such as replacing the chlorinator. 

The managers will need to decide how to fund the necessary rehabilitations or replacements. Based on the System Inventory Worksheet, many of the 

system’s assets will require major rehabilitation or replacement every 10 years. The remaining worksheets in this guide will help the system managers 

determine how much money they will need to reserve each year and whether current revenues can cover the costs of on-going operation and 

rehabilitation and replacement of all of these assets. If current revenues are insufficient, they will need to seek additional sources of funding. 

19

Step #3 – How Do I Plan for the Future? 

Now that you have prioritized your assets, you will have to determine how much it will cost to rehabilitate and replace them as they deteriorate. To 

properly protect public health and deliver safe water, you need to rehabilitate and replace your assets in addition to operating your water system. Many 

systems will need considerable lead-time to budget and gather the necessary funds. By developing an asset management plan, you will be able to 

allocate your resources in the most efficient way. 

The Required Reserve Worksheet on the next few pages will lead you through the steps 

necessary to determine how much money you need to put in reserve each year (for the next 

five years) to fund your highest priority activities. This reserve should be protected from 

other use. 

The worksheet will give you an idea of how much money you should set aside to fund your 

reserve account this year. Changes in your system’s finances and costs of new assets can 

change from year to year. It is important that you update this worksheet every year. This 

will ensure that you have enough reserves to cover necessary rehabilitations and 

improvements. This worksheet only helps account for additional funds you will need to 

rehabilitate or replace your assets. Standard O&M costs (e.g., chemicals for disinfection) 

are not included in the calculations on this worksheet. 

Remember that while the total reserves needed each year may at first seem overwhelming, it is easier to put aside $500 a year to replace a storage tank 

than to pay $20,000 to replace it when it fails. Step #4 will discuss some of your system’s options for raising revenues to carry out your asset 

management plan. Contact your State or Regional Tribal Coordinator for additional ideas on funding options available to your system. 

Remember! 

A preventive maintenance program will allow you to maximize the useful lives of your assets and can help you avoid problems and cut down or delay 

replacement costs. Contact your State or Regional Tribal Coordinator for more information on developing and implementing a preventive 

maintenance program. 

20

Introduction to the Required Reserve Worksheet 

The following Required Reserve Worksheet will help you calculate the amount of money that you will need to set aside every year (your annual reserve) to 

pay for the rehabilitation and replacement of your assets. Standard O&M costs are not included. 

The worksheet asks for the estimated cost of rehabilitation and replacement activities associated with your highest-priority assets. Remember to gather 

information on all of the costs associated with rehabilitation and replacement such as equipment purchase, installation, pilot tests, labor charges, clean up, 

and disposal of the replaced asset. To determine your estimated costs, you can: 

 Ask local contractors and businesses for estimated costs. 

 Contact equipment manufacturers. 

 Talk to neighboring systems about the cost of their rehabilitations or replacements. 

 Discuss this with your state, tribal, or local technical assistance organization. 

This worksheet can be used to estimate your annual reserves for the next five years. The worksheet uses a five year forecast to help you think about and 

begin financial planning for your short-term future needs. Although several of your assets will have remaining useful lives considerably longer than five 

years, it is unlikely that you will be able to forecast your water system’s situation much farther into the future. You should update the worksheet at least 

once a year because your system is likely to experience changes in costs, budgeting, and funding. 

Two copies of the worksheet are provided. The first copy is followed by instructions that will help you understand how to complete it. The second 

worksheet is an example. Appendix A has blank worksheets that you can photocopy and use. 

21

R equired Reserve Worksheet

1 

D ate Worksheet Completed/Updated:

A sset (list from highest to

l owest priority) A ctivity

Y ears until

a ction needed C ost ($) R eserve required

c urrent year

T otal reserve in the current year

1 N ote: The Required Reserve Worksheet only helps you account for the additional funds you will require to rehabilitate or replace your asset. Standard

O &M costs are not included in this calculation.

1

3 5 6

7

2 4

22

Using the Required Reserve Worksheet 

This section presents instructions for completing the Required Reserve Worksheet. Each step presented here corresponds to a numbered section of the 

sample worksheet on page 22. 

Step #1 

Step #2 

Step #3 

Step #4 

Enter the date. 

 Circle whether you are completing or updating the 

worksheet and fill in the date. You should update this 

worksheet at least once a year. You can either make 

minor adjustments to the worksheet, or start a new 

worksheet each year. 

List your prioritized assets. 

 List the assets from the Prioritization Worksheet. List 

the assets in order, with the highest priority assets 

(lowest number) first. 

List activities. 

 For each asset, list the rehabilitation and replacement 

activities that you expect to perform over the next five 

years. Provide enough detail for each activity so that 

you can determine the cost of the activity. 

Estimate years until action needed. 

 For each activity, fill in the number of years before you 

will need to do that task. 

 For annual activities, enter “1.” 

 For replacement activities, enter the remaining useful 

life you estimated in step 8 of the System Inventory 

Worksheet. 

Estimate cost. 

Step #5  Fill in the expected cost for each activity. Make sure to 

include the complete cost, including preparation, cleanup, removal, and disposal of any waste. 

 If you expect to sell an asset at the end of its useful 

life, subtract the estimated sale price from the cost of a 

new item and enter the difference. 

Calculate the reserve required per year. 

Step #6  For each asset, calculate the reserve required by 

dividing the cost by the years until the action is needed. 

This is the estimated amount of money that your 

system needs to set aside per year for that asset. 

Calculate the total reserve required in the current year. 

Step #7  Add the reserve required per year for each item to 

calculate the total reserve required in the current year. 

This is the estimated amount of money that your 

system needs to set aside, starting this current year, if 

you want to pay for all of these rehabilitation and 

replacement activities. 

23

R equired Reserve Worksheet

1 

D ate Worksheet Completed/Updated:

A sset (list from highest to

l owest priority) A ctivity

Y ears until

a ction needed C ost ($) R eserve required

c urrent year

T otal reserve in the current year

1 N ote: The Required Reserve Worksheet only helps you account for the additional funds you will require to rehabilitate or replace your asset. Standard

O &M costs are not included in this calculation.

EXAMPLE 

8/15/02 

1. Chlorinator Replace 2

2. Pumphouse - Electrical 

3. Well Pumps 

4. Valves 

5. Hydrants 

6. Pipe 

7. Storage 

Purchase redundant unit 

Replace with controller 

Replace Well 1 pump 

Replace Well 2 pump 

Next Replacements (2 well pumps at $5000 each) 

Replacement 

(45 valves at $500 each) 

Replacement 

(30 hydrants at $2,000 each) 

6-inch (3600 ft. at $20/ft.) 

4-inch (9500 ft. at $20/ft. - replace 4-inch with 6 inch) 

2-inch (2000 ft. at $20/ft. - replace 2-inch with 6 inch) 

(Total is 15,100 ft. at $20/ft.) 

Rehabilitate 3 tanks 

(1 every 8 years, 1993 and 2000 tanks) 

Replace - 2 tanks 

1 tank (2000 tank) 

1 

1 

1 

1 

10 

31 

31 

51 

5 

31 

38 

$2,000 

$2,000 

$2,000 

$5,000 

$5,000 

$10,000 

$22,500 

$60,000 

$302,000 

$50,000 

$40,000 

$20,000 

$1,000 

$2,000 

$2,000 

$5,000 

$5,000 

$1,000 

$726 

$1,935 

$5,922 

$10,000 

$1,290 

$526 

$36,399 $36,399

(1993 tanks) 

24

Explanation of Example Required Reserve Worksheet 

In order to calculate the funds the system will have to set aside each year to pay for the upkeep of its assets, the managers complete the Required 

Reserve Worksheet. By inventorying and determining the condition of the system’s assets, and evaluating when they will need to be replaced, the 

managers realize: 

 That while none of the items that require replacement within the next 1-2 years (the chlorinator, the pumps, and the electrical system for the 

pumphouse) is very expensive, they will have to set aside approximately $16,000 in the next two years to cover the cost of replacing these assets. 

 The replacement of pipes in this system’s distribution system is by far the most costly activity for the system. It will cost an estimated $302,000 to 

replace pipes, but since this cost can be spread out over 50 years, they only need to put aside an additional $6,000 a year (every year) to fund this 

activity. 

 The total reserve required to successfully implement this asset management plan is around $36,500 per year. 

Before beginning the asset management plan process, the managers were planning on replacing the chlorinator next year but did not plan on replacing 

either of the well pumps until they broke. Now, they plan on using some of the system’s current reserve fund to purchase a redundant unit and to begin 

saving for the replacement of one of the well pumps. They also decide to meet with town officials to discuss system priorities, costs, and funding options. 

25

Step #4 – How Do I Carry Out This Plan? 

In the previous section, you may have discovered that you should be reserving additional money every year to cover the cost of rehabilitating and 

replacing your assets. Preparing a financial forecast (by estimating how much revenue you expect for the next five years) will help you determine if you 

will need to supplement your revenues to carry out your asset management plan. 

If you don’t already have a five-year forecast, the Budgeting Worksheet on page 28 will help you complete this 

task. In addition, to increase or more efficiently use your revenues to operate and maintain your system and 

carry out your asset management plan you can: 

 Create additional reserve accounts. Reserve all or some of the money you will need in a protected 

capital improvement reserve account and create an emergency account to fund unexpected repairs and 

replacements. You may be restricted in how much money can be placed in reserve accounts. Check with 

your state or tribal coordinator for more information. Contact information is provided in Appendix E. 

 Form partnerships. Working with other water systems may allow you to lower costs, simplify 

management, and continue to provide your customers with safe drinking water. 

 Consider increasing rates. Alternatively, consider assessing a flat fee for infrastructure improvements or funding of a reserve account. Check with 

your state for rate-setting information. 

 Apply for financial assistance. Banks and government agencies can provide funds for infrastructure projects such as treatment facilities, 

distribution lines, and water source development. If you do not have enough funds to pay for needed capital improvements, you can apply for loans 

and grants. Although you will pay interest on loans which will, over the long term, increase your costs, loans will allow you to address needed system 

improvements without dramatically increasing rates or assessing fees to cover the costs. Seek financial advice from your city clerk, a certified 

accountant, or contact your State or Regional Tribal Capacity Development Coordinator if you are considering a loan to fund capital improvement 

projects. The table in Appendix B provides information on some programs that may provide financial assistance to help you fund major infrastructure 

improvement and replacement projects. 

26

Introduction to the Budgeting Worksheet 

The following simple five-year Budgeting Worksheet will help you quickly determine: 

 Your system’s annual revenues from fees, loans and grants, interest from any accounts, and other sources of income. 

 Your annual expenditures on maintenance, utilities, salaries and benefits, office supplies, professional services, taxes, and loan payments. 

 Your net income. 

 How much additional funding you will need to continue to operate and maintain your system and replace and repair your assets.2 

You should complete the Budgeting Worksheet every year. It will allow you to assess your financial situation and properly plan for future needs. Two 

copies of the worksheet are provided. The first copy is followed by instructions that will help you understand how to complete it. The second worksheet is 

an example. Appendix A has blank worksheets that you can photocopy and use. 

The budgeting worksheet is intended to help you understand the financial position of your system and forecast any potential shortfalls you may face. 

It will help you determine whether or not you are adequately funding your reserve account(s) and whether or not you should begin searching for 

additional funding sources. It is not meant to serve as an accounting tool, nor is it intended to replace your current accounting practices. 

2 The Budgeting Worksheet does not take into account current reserves or your annual contributions to other reserve accounts. If you already have reserve accounts, 

you can use them to supplement your asset management plan. It is important, however, to continue contributing to these reserve accounts so that you don't experience 

a shortfall if you use these funds for repair and replacement of assets. 

27

B udgeting Worksheet

D ate Worksheet Completed/Updated:

R evenues E xpense N et Incom

S ervice Fees: M aintenance T otal Revenues:

F ees and Service Charges (late

f ee, connection fee, fire fee, etc.):

U tilities (power, telephone): T otal Expenses:

S alaries and Benefits:

I mpact Fees (demand fee, system

d evelopment fee, etc.):

E quipment Cost: N et Income

C hemicals: ( Revenue - Expenses):

S ecured Funding: M onitoring and Testing

I nterest: R ent or Mortgage

O ther: I nsurance

P rofessional Services

( legal, accounting, engineering, etc.):

T raining Costs:

B illing Costs:

F ees (state PWS fee,franchise fee,

c onservation fee, etc.): A dditional Reserves Needed

S ecurity: T otal Required Reserves:

O ther (debt payments, taxes,

m iscellaneous, etc.):

N et Income:

A dditional Reserves Needed

( Income - Required Reserves):

T otal Revenues: T otal Expenses

1

3 5

4

6

7

2

8

9

s e

:

:

:

:

:

28

Using the Budgeting Worksheet 

This section presents instructions for completing the Budgeting Worksheet. Each step presented here corresponds to a numbered section of the sample 

worksheet on page 28. 

Step #1 

Step #2 

Step #3 

Step #4 

Step #5 

Enter the date. 

 Circle whether you are completing or updating the 

worksheet and fill in the date. You should update this 

worksheet once a year. You can either make minor 

adjustments to the worksheet, or start a new worksheet 

each year. 

List your revenues. 

 Fill in your revenues in the lines provided. If your 

system has other sources of income not listed on the 

worksheet, enter them in the “Other” lines provided. 

Calculate total annual revenues. 

 Calculate your total revenues by adding all the 

revenues you listed in the previous step. Enter this 

number in the box marked “Total Revenues.” Do not 

include funding you expect but have not secured. 

List your expenses. 

 Fill in your expenses in the lines provided. If your 

system has other expenses not listed on the 

worksheet, enter them in the “Other” lines provided. 

Calculate total expenses. 

 Calculate your total expenses by adding all the 

expenses you listed in the previous step. Enter this 

number in the box marked “Total Expenses. 

Step #6 

Step #7 

Step #8 

Step #9 

Calculate net income. 

 Enter the result of step 3 on the “Total Revenues” line 

and the result of step 5 on the “Total Expenses” line. 

Calculate your net income by subtracting your 

expenses from your revenues. Enter this number on 

the “Net Income” line. 

Enter your total required reserves. 

 Enter your total required reserves from the Required 

Reserves Worksheet. 

Enter your net income.


 Enter the result of step 6 on the “Net Income” line.


Calculate additional reserves needed. 

 Subtract your total required reserves (from step 7) from 

your net income (from step 8). Enter this number in 

the box marked “Additional Reserves Needed.” 

 If the result is a positive number (i.e., your resources 

are larger than your required reserves), you will not 

have to plan for ways to make up for the shortfall and 

can set aside the required funds in a reserve account. 

 If the result is a negative number (i.e., your resources 

are less than the required reserves), you should start 

planning for ways to make up for the shortfall. 

29

B udgeting Worksheet

D ate Worksheet Completed/Updated:

R evenues E xpense N et Incom

S ervice Fees: M aintenance T otal Revenues:

F ees and Service Charges (late

f ee, connection fee, fire fee, etc.):

U tilities (power, telephone): T otal Expenses:

S alaries and Benefits:

I mpact Fees (demand fee, system

d evelopment fee, etc.):

E quipment Cost: N et Income

C hemicals: ( Revenue - Expenses):

S ecured Funding: M onitoring and Testing

I nterest: R ent or Mortgage

O ther: I nsurance

P rofessional Services

( legal, accounting, engineering, etc.):

T raining Costs:

B illing Costs:

F ees (state PWS fee,franchise fee,

c onservation fee, etc.): A dditional Reserves Needed

S ecurity: T otal Required Reserves:

O ther (debt payments, taxes,

m iscellaneous, etc.):

N et Income:

A dditional Reserves Needed

( Income - Required Reserves):

T otal Revenues: T otal Expenses

EXAMPLE 

8/14/02 

$249,971 

$5,284 

$175 

$54,320 

$3,992 

$76,689 

$1,371 

$40,512 

$8,096 

$1,453 

$400 

$1,000 

$2,500 

$500 

$609 

$53,630 

$255,430 

$245,072 

$10,358 

$34,625 

$10,358 

-$24,267 

$255,430 $245,072 

s e

:

:

:

:

:

30

Explanation of Example Budgeting Worksheet 

In order to better understand their financial position, the managers for the water system must complete the budgeting worksheet. Note that almost all of 

their revenues come from service fees ($249,971 of $255,430 in total revenues). Most of their expenditures go to pay for maintenance, salaries and 

benefits, and chemicals. 

On the surface, it would seem that the system is in a fairly good financial situation. After expenses, it has a net income of $10,358 a year. However, the 

system cannot afford the annual $34,625 contribution to its reserve account with its current income. If the system does not raise revenues or secure 

outside funding, it will not have the income necessary to pay for rehabilitation and replacement of its assets in the future. The water system managers will 

have to start thinking about how to raise the additional revenue necessary to make up for the shortfall. 

31

Step #5 – What Should I Do Next? 

Once you have inventoried and prioritized your assets, determined how much money you will need to set 

aside each year to fund the rehabilitation and replacement of your assets, and explored funding options for 

your water system, you can use your asset management plan to help plan your water system’s future. You 

will have a good picture of when you will need to replace your assets and how much money you will need to 

fund those replacements and continue to deliver safe and secure drinking water to your customers. 

Remember that the worksheets should be reviewed, revised, and updated on an annual basis. Your asset 

management plan should help you shape your system’s operations and should change as your priorities 

change. Current information in the worksheets provides a better picture of your system’s position, and 

better prepares you to meet your water system’s future needs. 

Taken in tandem with the strategic planning tools available in EPA’s Strategic Planning STEP Guide (EPA 

816-R-03-015), the worksheets will give you a good idea of the challenges your system may face in the 

future and help you think about the most cost-effective and efficient way to address those challenges. 

Consulting with your State or Regional Tribal Capacity Development Coordinators and developing a plan of 

action with their assistance will ensure that you can continue to deliver safe and secure drinking water well 

into the future. 

32

Appendix A: Worksheets 

----------------------------------------------------------------------------------------cut along dotted line--------------------------------------------------------------------------------------

S ystem Inventory Worksheet

D ate Worksheet Completed/Updated:

A sset E xpected

U seful Life

C ondition S ervice Histor

A djusted

U seful Life

A ge

R emaining

U seful Life y

33

----------------------------------------------------------------------------------------cut along dotted line--------------------------------------------------------------------------------------

P rioritization Worksheet

D ate Worksheet Completed/Updated:

A sset R emaining

U seful Life

I mportance R edundanc

P riority

( 1 is high) y

34

-----------------------------------------------------------------------------------------cut along dotted line-------------------------------------------------------------------------------------

R equired Reserve Worksheet

1 

D ate Worksheet Completed/Updated:

A sset (list from highest to

l owest priority) A ctivity

Y ears until

a ction needed C ost ($) R eserve required

c urrent year

T otal reserve in the current year

1 N ote: The Required Reserve Worksheet only helps you account for the additional funds you will require to rehabilitate or replace your asset. Standard

O &M costs are not included in this calculation.

35

-----------------------------------------------------------------------------------------cut along dotted line-------------------------------------------------------------------------------------

B udgeting Worksheet

D ate Worksheet Completed/Updated:

R evenues E xpense N et Incom

S ervice Fees: M aintenance T otal Revenues:

F ees and Service Charges (late

f ee, connection fee, fire fee, etc.):

U tilities (power, telephone): T otal Expenses:

S alaries and Benefits:

I mpact Fees (demand fee, system

d evelopment fee, etc.):

E quipment Cost: N et Income

C hemicals: ( Revenue - Expenses):

S ecured Funding: M onitoring and Testing

I nterest: R ent or Mortgage

O ther: I nsurance

P rofessional Services

( legal, accounting, engineering, etc.):

T raining Costs:

B illing Costs:

F ees (state PWS fee,franchise fee,

c onservation fee, etc.): A dditional Reserves Needed

S ecurity: T otal Required Reserves:

O ther (debt payments, taxes,

m iscellaneous, etc.):

N et Income:

A dditional Reserves Needed

( Income - Required Reserves):

T otal Revenues: T otal Expenses

s e

:

:

:

:

:

36

Appendix B: Sources of Financial Assistance to Drinking 

Water Systems 

System improvements can be funded by raising rates, issuing bonds, or by successfully applying for loans or grants. The table below provides information 

on some programs that may provide financial assistance to help you raise the money your system will require to maintain its assets in good condition, 

replace deteriorated assets, and continue to provide safe and secure drinking water to your customers. Consult with your State or Regional Tribal 

Capacity Development Coordinator and the Public Service Agency in your state for additional information. 

M ajor Providers of Financial Assistance to Drinking Water Systems

N ame of Program D escription C ontact Information

D rinking Water State Revolving Fund

( DWSRF)

T hese state-administered loans enable water systems to

f inance infrastructure improvements, provide training, and fund

s ource water protection activities.

w ww.epa.gov/safewater/dwsrf/contacts.html

S afe Drinking Water Hotline at (800) 426-4791

R ural Utilities Service (RUS) Water and

W astewater Loan and Grant Program

T his program offers loans and grants to develop water and

w aste-disposal systems in rural areas to reduce user costs.

w ww.usda.gov/rus/water/states/usamap.htm

( 202) 720-9540

S tate-specific programs Y our state may offer additional funding programs. S ee Appendix E for state contact information

T ribal-specific programs

E PA gives grants (not loans) to tribes through the DWSRF

T ribal Set-Aside program for improvements to water systems

t hat serve tribes. States and the Indian Health Service may

p rovide additional financial assistance.

S ee Appendix F for tribal contact information

37

O ther Potential Sources of Financing or Financial Assistance for Drinking Water Systems

N ame of Program D escription C ontact Information

C ommunity Development Block Grants

( CDBG)

T his program offers grants to disadvantaged cities, urban

c ounties, and states to develop viable communities.

w ww.hud.gov/offices/cpd/communitydevelopment /programs/stateadmin/stateadmincontact.cfm

( 202) 708-1112

P ublic Works and Infrastructure

D evelopment Grants

T hese grants help distressed communities overcome barriers

t hat inhibit the growth of their local economies.

w ww.doc.gov/eda/HTML/1c_regloffices.htm

( 202) 482-5081

N ational Bank for Cooperatives Loan

P rogram (CoBank) C oBank provides loans to larger, credit-worthy rural utilities. w ww.cobank.com

( 800) 542 -8072

R ural Community Assistance

C orporation (RCAC)

R CAC provides loans to rural utilities in 11 western states to

h elp meet the financing needs of rural communities and

d isadvantaged populations.

h ttp://www.rcac.org/programs/serv-financial.html

( 916) 447-2854

S mall Business Administration (SBA) S BA helps small businesses get low-interest loans. w ww.sba.gov

( 800) 827-5722

L ocal Commercial Banks

B anks in your community can offer loans to help finance

c apital improvements. Although interest rates may not be as

f avorable as other options, it may be easier for you to

n egotiate a loan through a local bank.

T alk to your city clerk about what banks in your

a rea most closely match your needs.

Before you apply for funding, find out what each source will pay for and what information they will need to consider in your application. Ask about local 

matching fund requirements, application procedures, what makes a project “fundable,” and special program requirements and restrictions. Ask to see 

applications from previously funded projects. Get an idea of what information is required for an application; most lending and granting agencies will want 

to see financial statements such as budgets, income statements, and cash flow documents. Publicly-owned systems may need a clean opinion from an 

auditor to show good accounting practices and/or compliance with GASB 34. See Appendix C for more information on GASB 34. 

38

Appendix C: Introduction to GASB 34 

The Governmental Accounting Standards Board (GASB) is a private, nonprofit organization that is responsible for establishing and improving 

governmental accounting and financial reporting standards. GASB also establishes generally accepted accounting principles (GAAP) for state and local 

governmental entities, including publicly-owned water systems.3 The standards and principles developed by GASB are strictly voluntary. However, some 

states may incorporate them into their laws and regulations and therefore make them mandatory for local governments and the water systems they 

operate. 

In June 1999, GASB approved “Statement Number 34, Basic Financial Statements and Management’s Discussion and Analysis for State and Local 

Governments.”4 Statement Number 34 revised several accounting practices and established new standards for the annual financial reports required of 

state and local governments. The revisions were intended to make annual financial reports easier to understand and make the financial data more useful 

to decision makers. 

GAAP and GASB 34 make good sense for publicly-owned water systems as these principals are often the best way to keep track of finances. Following 

them will help you form a better picture of your system’s financial health, forecast future shortfalls, and continue to deliver safe drinking water to your 

customers. In addition, following GASB standards is a must for obtaining a “clean opinion” (i.e., a good credit rating) from an auditor. Clean opinions are 

often necessary for loans, negotiating favorable interest rates, or issuing bonds. 

GASB 34 requires: 

1. An accounting of revenues and expenditures in the period in which they are earned or incurred. This is called accrual-based accounting. For 

example, if the water system provides water in December 2003 and receives payment in February 2004, the water system would report that the 

money was earned in 2003. This change will allow the system and its investors to understand the direct financial results of its investments. 

3 The Financial Accounting Standards Board (FASB) establishes and improves standards of financial accounting and reporting in the private sector. If your system is 

privately owned, visit www.fasb.org for more information on private accounting standards. 

4 The new standards took effect for small governments (including water systems) with annual revenues of less than $10 million on June 15, 2003. 

39

2. A reporting of the value of infrastructure assets and the cost of deferred maintenance. These measures allow the public to evaluate how well the 

system is managing its assets. A current asset management plan is a valuable tool to help you meet this requirement if you are complying with 

Statement 34. In addition, reporting the true cost of deferred maintenance (i.e., unmade repairs that result in equipment or facility deterioration) 

may allow systems to more easily raise money for maintenance activities necessary to use facilities and equipment for their full expected lives. 

3. Contributed capital (for example, federal grants) to be considered a form of income. This change will increase a system’s reported income. While 

reporting all forms of income is a necessary accounting principal, this method of reporting (which includes contributed capital) may make it more 

difficult to justify rate increases. 

For more information, talk to your city clerk, ask a certified public accountant, or contact your State or Regional Tribal Capacity Development Coordinator. 

GASB’s website offers more information on Statement 34, as well as guidance documents, case studies of entities that have implemented Statement 34, 

and trainings. Visit www.gasb.org for more information. 

40

Appendix D: Sources for More Information on Asset


Management 

Electronic Programs 

 CAPFinance. The Environmental Finance Center at Boise State 

University has developed an easy-to-use computer program to help 

water systems inventory their assets and analyze funding options for 

rehabilitation and replacement of assets. For more information or to 

order a copy, call (208) 426-1567 or visit their website http:// 

sspa.boisestate.edu/efc/services.htm. 

 Show-me Water Ratemaker. The Missouri Department of Natural 

Resources has developed analysis software to help water systems set 

rates. To obtain a free copy see: http://www.dnr.state.mo.us/oac/ 

Ratemakerbrochure.pdf, or call (800) 361-4827. 

Documents 

 A Guidebook of Financial Tools, produced by the Environmental 

Financial Advisory Board and the Environmental Finance Center 

Network, is available in PDF format at: http://www.epa.gov/efinpage/ 

guidbkpdf.htm. It is also available by emailing efin@epa.gov or by 

calling (800) 490-9198. 

 Financial Accounting Guide for Small Water Utilities, Michael D. Peroo, 

1997, Kansas Rural Water Association. This document is available 

through the National Drinking Water Clearinghouse, West Virginia 

University, (800) 624-830. 

 GASB 34: What Is It? Why Should You Care?, copy can be 

downloaded from www.nrwa.org/2001/frontpage/Pages/gasb34.htm. 

Assistance 

 EPA’s Environmental Finance Program provides financial and technical 

assistance to water systems and other regulated entities. Visit 

www.epa.gov/efinpage/ or call (202) 564-4994 for more information 

about the program, for access to the program’s publications, and to 

reach the Environmental Finance Center network. 

Additional Organizations 

 American Water Works Association: www.awwa.org 

 Association of Metropolitan Water Agencies: www.amwa.net 

 Association of State Drinking Water Administrators: www.asdwa.org 

 Government Finance Officers Association: www.gfoa.org 

 National Association of Regulatory Utility Commissioners: 

www.naruc.org 

 National Association of Water Companies: www.nawc.org 

 National Rural Water Association: www.nrwa.org 

 Rural Community Assistance Program: www.rcap.org 

 Rural Utilities Service: www.usda.gov/rus 

41

Appendix E: Safe Drinking Water Act Primacy Agencies 

For additional information or to learn more about the laws in your own state, please contact your EPA Regional Coordinator or State Drinking Water 

Agency. 

E PA Region 1 w ww.epa.gov/region1/eco/drinkwater/index.html ( 617) 918-1584

C onnecticut

D epartment of Public Health: Drinking Water Division

w ww.dph.state.ct.us/BRS/water/dwd.htm ( 860) 509-7333

M aine

M aine Department of Human Services: Division of Health Engineering

w ww.state.me.us/dhs/eng/water/index.htm ( 207) 287-2070

M assachusetts

D epartment of Environmental Protection: Drinking Water Program

w ww.state.ma.us/dep/brp/dws/dwshome.htm ( 617) 292-5770

N ew Hampshire

D epartment of Environmental Services: Water Supply Engineering Bureau

w ww.des.state.nh.us/wseb/ ( 603) 271-2513

R hode Island

D epartment of Health: Office of Drinking Water Quality

w ww.healthri.org/environment/dwq/Home.htm ( 401) 222-6867

V ermont

D epartment of Environmental Conservation: Water Supply Division

w ww.vermontdrinkingwater.org ( 802) 241-3400

E PA Region 2 w ww.epa.gov/region02/water/drinkingwater/ ( 212) 637-3879

N ew Jersey

D epartment of Environmental Protection: Bureau of Safe Drinking Water

w ww.state.nj.us/dep/watersupply/safedrnk.htm ( 609) 292-5550

N ew York

D epartment of Public Health: Bureau of Public Water Supply Protection

w ww.health.state.ny.us/nysdoh/water/main.htm ( 518) 402-7650

P uerto Rico

D epartment of Health: Public Water Supply Supervision Program

w ww.epa.gov/region02/cepd/prlink.htm ( 787) 977-5870

V irgin Islands

D epartment of Planning and Natural Resources: Division of Environmental

P rotection

w ww.epa.gov/region02/cepd/vilink.htm ( 340) 773-1082

42

E PA Region 3 w ww.epa.gov/reg3wapd/ ( 215) 814-2300

D elaware

D elaware Health and Social Services: Division of Public Health w ww.state.de.us/dhss/dph/hsp.htm ( 302) 739-541

D istrict of Columbia

E nvironmental Health Administration: Water Resources Management Division

w ww.dcwasa.com/ ( 202) 535-219

M aryland

D epartment of the Environment: Public Drinking Water Program

w ww.mde.state.md.us/aboutmde/reports/index.asp ( 410) 537-300

P ennsylvania

D epartment of Environmental Protection: Bureau of Water Supply Management

w ww.dep.state.pa.us/dep/deputate/watermgt/wsm/

w sm.htm ( 717) 787-5017

V irginia

D epartment of Health: Division of Water Supply Engineering

w ww.vdh.state.va.us/ddw/index.htm ( 804) 786-556

W est Virginia

B ureau for Public Health: Environmental Engineering Department w ww.wvdhhr.org/oehs/eed/ ( 304) 558-298

0

0

0

6

1

E PA Region 4 w ww.epa.gov/region4/water/ ( 404) 562-9345

A labama

D epartment of Environmental Management: Water Supply Branch

w ww.adem.state.al.us/WaterDivision/

W aterDivisionPP.htm ( 334) 271-7773

F lorida

D epartment of Environmental Protection: Drinking Water Section

w ww.dep.state.fl.us/water/drinkingwater/index.htm ( 850) 487-1762

G eorgia

D epartment of Natural Resources: Water Resources Branch w ww.dnr.state.ga.us/dnr/environ/ ( 404) 656-4087

K entucky

D epartment of Environmental Protection: Drinking Water Branch w ater.nr.state.ky.us/dw/ ( 502) 564-3410

M ississippi

D epartment of Health: Division of Water Supply

w ww.msdh.state.ms.us/watersupply/index.htm ( 601) 576-7518

N orth Carolina

D epartment of Environment and Natural Resources: Public Water Supply

S ection

w ww.deh.enr.state.nc.us/pws ( 919) 733-2321

S outh Carolina

D epartment of Health and Environmental Control: Bureau of Water

w ww.scdhec.net/water/html/dwater.html ( 803) 898-4300

T ennessee

D epartment of Environment and Conservation: Division of Water Supply

w ww.state.tn.us/environment/dws/ ( 615) 532-0191

43

E PA Region 5 w ww.epa.gov/r5water/ ( 312) 886-4239

I llinois

E nvironmental Protection Agency: Division of Public Water Supplies

w ww.epa.state.il.us/water/index-pws.html ( 217) 785-8653

I ndiana

D epartment of Environmental Management: Drinking Water Branch w ww.ai.org/idem/owm/dwb/index.html ( 317) 308-3282

M ichigan

D epartment of Environmental Quality: Drinking Water and Radiological

P rotection Division

w ww.michigan.gov/deq ( 517) 335-9216

M innesota

D epartment of Health: Drinking Water Protection Section

w ww.health.state.mn.us/divs/eh/index.html ( 651) 215-0770

O hio

E nvironmental Protection Agency: Division of Drinking and Ground Water

w ww.epa.state.oh.us/dsw/ ( 614) 644-2752

W isconsin

D epartment of Natural Resources: Bureau of Water Supply

w ww.dnr.state.wi.us/org/water/dwg/index.htm ( 608) 266-2299

E PA Region 6 w ww.epa.gov/region6/water ( 214) 665-2757

A rkansas

D epartment of Health: Division of Engineering

w ww.healthyarkansas.com/eng/index.html ( 501) 661-2623

L ouisiana

O ffice of Public Health: Division of Environmental and Health Services

w ww.dhh.state.la.us/OPH/safewtr.htm ( 225) 765-5038

N ew Mexico

E nvironment Department: Drinking Water Bureau

w ww.nmenv.state.nm.us/dwb/dwbtop.html ( 505) 827-7536

O klahoma

D epartment of Environmental Quality: Water Quality Division

w ww.deq.state.ok.us/WQDnew/index.htm ( 405) 702-8100

T exas

T exas Commission on Environmental Quality: Water Supply Division

w ww.tnrcc.state.tx.us/permitting/waterperm/pdw/

p dw000.html ( 512) 239-6096

44

E PA Region 7 w ww.epa.gov/region7/water/dwgw.htm ( 913) 551-7030

I owa

D epartment of Natural Resources: Water Supply Section

w ww.state.ia.us/epd/wtrsuply/wtrsup.htm ( 515) 725-0275

K ansas

D epartment of Health and Environment: Public Water Supply Section

w ww.kdhe.state.ks.us/pws/ ( 785) 296-5514

M issouri

D epartment of Natural Resources: Public Drinking Water Program

w ww.dnr.state.mo.us/wpscd/pdwp/homepdwp.htm ( 573) 751-5331

N ebraska

D epartment of HHS Regulation and Licensure

w ww.hhs.state.ne.us/enh/enhindex.htm ( 402) 471-2541

E PA Region 8 w ww.epa.gov/region08/water/ ( 303) 312-7021

C olorado

D epartment of Public Health and Environment: Drinking Water Program

w ww.cdphe.state.co.us/wq/wqhom.asp ( 303) 692-3500

M ontana

D epartment of Environmental Quality: Public Water Supply Section

w ww.deq.state.mt.us/wqinfo/index.asp ( 406) 444-3080

N orth Dakota

D epartment of Health: Division of Municipal Facilities

w ww.ehs.health.state.nd.us/ndhd/environ/mf/index.htm ( 701) 328-5211

S outh Dakota

D epartment of Environment and Natural Resources: Drinking Water

P rogram

w ww.state.sd.us/denr/des/drinking/dwprg.htm ( 605) 773-3754

U tah

D epartment of Environmental Quality: Division of Drinking Water

w ww.deq.state.ut.us/eqdw/Index.htm ( 801) 536-4200

W yoming

E PA Region VIII: Wyoming Drinking Water Program

w ww.epa.gov/region08/water/dwhome/wycon/wycon.html ( 303) 312-6312

45

E PA Region 9 w ww.epa.gov/region9/water/index.html ( 415) 744-1884

A merican Samoa

E nvironmental Protection Agency: American Samoa

w ww.epa.gov/Region9/cross_pr/islands/samoa.html ( 415) 744-2170

A rizona

D epartment of Environmental Quality: Drinking Water Monitoring and

A ssessment Division

w ww.adeq.state.az.us/environ/water/dw/index.html ( 602) 207-4644

C alifornia

D epartment of Health Services: Division of Drinking Water and

E nvironmental Management

w ww.dhs.cahwnet.gov/org/ps/ddwem/ ( 916) 323-6111

G uam

G uam Environmental Protection Agency

w ww.epa.gov/region09/cross_pr/islands/guam.html ( 671) 472-8863

H awaii

D epartment of Health: Environmental Management Division

w ww.hawaii.gov/health/eh/sdwb/index.html ( 808) 586-4258

N evada

D epartment of Human Resources: Bureau of Health Protection Services

w ww.health2k.state.nv.us/bhps/phe/sdwp.htm ( 775) 687-6615

E PA Region 10 w ww.epa.gov/region10/ ( 206) 553-1389

A laska

D epartment of Environmental Conservation: Drinking Water and Wastewater

P rogram

w ww.state.ak.us/dec/deh/safewater.htm ( 907) 269-7653

I daho

D epartment of Environmental Quality: Water Quality Division

w ww2.state.id.us/deq/water/water1.htm ( 208) 373-0502

O regon

D epartment of Human Resources: Drinking Water Program

w ww.ohd.hr.state.or.us/dwp/index.htm ( 503) 731-4317

W ashington

D epartment of Health: Drinking Water Division

w ww.doh.wa.gov/ehp/dw/ ( 360) 236-3096

46

Appendix F: Tribal Contacts 

For additional information or to learn more about the laws governing your Tribe, use the contact information provided in this Appendix. 

U S EPA Headquarters

A merican Indian Environmental Office w ww.epa.gov/indian ( 202) 564-0303

U S EPA Regional Tribal Capacity Development Coordinators

E PA Region 1 w ww.epa.gov/region01/topics/government/tribal.html ( 888) 372-7341

E PA Region 2 w ww.epa.gov/region02/nations/index.html ( 212) 637-3600

E PA Region 4 w ww.epa.gov/region04/ead/indian/index.htm ( 404) 562-6939

E PA Region 5 w ww.epa.gov/region5/water/stpb ( 312) 353-2123

E PA Region 6 w ww.epa.gov/region06/6xa/tribal.htm ( 800) 887-6063

E PA Region 7 w ww.epa.gov/region07/government_tribal/index.htm ( 913) 551-7030

E PA Region 8 w ww.epa.gov/region08/tribes ( 303) 312-6116

E PA Region 9 w ww.epa.gov/region09/cross_pr/indian/index.html ( 415) 744-1500

E PA Region 10 y osemite.epa.gov/r10/tribal.NSF/webpage/

t ribal+office+homepage?opendocument ( 206) 553-4011

O ther Contacts

A dministration for Native Americans w ww.acf.dhhs.gov/programs/ana/ ( 877) 922-9262

B ureau of Indian Affairs w ww.doi.gov/bureau-indian-affairs.html ( 202) 208-3710

I ndian Health Services w ww.ihs.gov ( 301) 443-3024

N ative American Water Association w ww.nawainc.org ( 775) 782-6636

47

Appendix G: Other STEP Guide Documents 

This brochure is one in a series of Simple Tools for Effective Performance (STEP) documents for small drinking water systems. The STEP documents 

can be obtained from EPA by calling the Safe Drinking Water Hotline at (800) 426-4791 and requesting the document by its publication number. The 

documents can also be found at www.epa.gov/safewater/smallsys/ssinfo.htm. 

AVAILABLE NOW 

A Small Systems Guide to the Total Coliform Rule (TCR) 

This workbook is designed to help small systems understand the TCR and


the mandatory monitoring required under the rule. The workbook provides


sample worksheets to help systems organize and track TCR monitoring


data, and provides appropriate follow-up actions should monitoring show a


positive presence of coliform.


Publication number EPA 816-R-01-017A


Published: June 2001


Safe Drinking Water Act (SDWA) Regulation Overview Brochure for Small 

Systems 

This brochure summarizes SDWA regulations that currently exist, are


proposed, or are under development that affect or will affect small water


systems. The brochure emphasizes how the regulations relate to each


other, and explains the multi-barrier approach to microbial and chemical/


radiological risks and how SDWA regulations fit into this type of framework.


Publication number EPA 816-R-03-017


Published: September 2003


Complying With the Revised Drinking Water Standard for Arsenic: Small 

Entity Compliance Guide 

This workbook is designed to help systems understand and achieve


compliance with the Arsenic Rule. The workbook provides sample


worksheets to help systems organize data, and provides guidance for small


systems on their selection of appropriate compliance options.


Publication number EPA 816-R-02-008A


Published: August 2002


Strategic Planning Workbook 

This workbook is designed to help systems understand the concept of


strategic planning and how it can help them prepare their water system to


meet public expectations and regulatory requirements while maintaining


organizational and financial stability in the future. The workbook provides


worksheets to help systems begin to plan strategically, assess their


capacity, define their area of service, identify options, and develop an


implementation plan for their system.


Publication number EPA 816-R-03-015


Published: September 2003


UNDER DEVELOPMENT 

Disinfectants/Disinfection By-Products (D/DBP) Rule Workbook 

Rate-Setting: A Handbook for Small Systems 

Restructuring: A Handbook for Small Systems 

48