a

GAO

United States General Accounting Office

Report to the Ranking Minority Member, 

Committee on Environment and Public 

Works, U.S. Senate

March 2004 WATER 

INFRASTRUCTURE

Comprehensive Asset 

Management Has 

Potential to Help 

Utilities Better 

Identify Needs and 

Plan Future 

Investments

GAO-04-461
www.gao.gov/cgi-bin/getrpt?GAO-04-461.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact John B. 

Stephenson (202) 512-3841 or 

stephensonj@gao.gov. 

Highlights of GAO-04-461, a report to the 

Ranking Minority Member, Committee on 

Environment and Public Works, U.S. 

Senate 

March 2004

WATER INFRASTRUCTURE 

Comprehensive Asset Management Has 

Potential to Help Utilities Better Identify 

Needs and Plan Future Investments 

Drinking water and wastewater utilities that GAO reviewed reported 

benefiting from comprehensive asset management but also finding certain 

challenges. The benefits include (1) improved decision making about their 

capital assets and (2) more productive relationships with governing 

authorities, rate payers, and others. For example, utilities reported that 

collecting accurate data about their assets provides a better understanding 

of their maintenance, rehabilitation, and replacement needs and thus helps 

utility managers make better investment decisions. Among the challenges to 

implementing asset management, utilities cited collecting and managing 

needed data and making the cultural changes necessary to integrate 

information and decision making across departments. Utilities also reported 

that the shorter-term focus of their governing bodies can hamper long-term 

planning efforts. 

EPA currently sponsors initiatives to promote the use of asset management, 

including educational materials, technical assistance, and research. While 

this is a good first step, GAO found that EPA could better coordinate some 

activities. For example, EPA has no central repository to facilitate 

information sharing within and across its drinking water and wastewater 

programs, which would help avoid duplication of effort. Water industry 

officials see a role for EPA in promoting asset management as a tool to help 

utilities meet infrastructure-related regulatory requirements; they also noted 

that establishing an EPA Web site would be useful for disseminating asset 

management information to utilities. The officials raised concerns, however, 

about the implications of mandating asset management, citing challenges in 

defining an adequate asset management plan and in the ability of states to 

oversee and enforce compliance. 

Elements of Comprehensive Asset Management 

Having invested billions of dollars 

in drinking water and wastewater 

infrastructure, the federal 

government has a major interest in 

protecting its investment and in 

ensuring that future assistance 

goes to utilities that are built and 

managed to meet key regulatory 

requirements. The Congress has 

been considering, among other 

things, requiring utilities to develop 

comprehensive asset management 

plans. Some utilities are already 

implementing asset management 

voluntarily. The asset management 

approach minimizes the total cost 

of buying, operating, maintaining, 

replacing, and disposing of capital 

assets during their life cycles, while 

achieving service goals. This 

report discusses (1) the benefits 

and challenges for water utilities in 

implementing comprehensive asset 

management and (2) the federal 

government’s potential role in 

encouraging utilities to use it. 

Among other things, GAO is 

recommending that the 

Environmental Protection Agency 

(EPA) (1) better coordinate its own 

activities to facilitate information 

sharing and reduce the potential 

for duplication and (2) ensure that 

water utilities have access to 

information they can use by 

establishing a Web site focused on 

asset management. In commenting 

on a draft of this report, EPA 

generally agreed with the report 

and its recommendations. 
Page i GAO-04-461 Water Utility Asset Management

Contents

Letter 1

Executive Summary 2

Purpose 2

Background 4

Results in Brief 5

Principal Findings 7

Recommendations for Executive Action 9

Agency Comments 9

Chapter 1

Introduction

11

The Federal Government Has Played a Major Role in Funding and 

Setting Requirements for Water Infrastructure 12

Projected Drinking Water and Wastewater Infrastructure Needs Are 

Significant 13

Many Factors Have Contributed to Deteriorating Utility 

Infrastructure 15

Comprehensive Asset Management Focuses on Efficiently Managing 

Capital Assets 17

Strategy for Adopting and Progress toward Implementing 

Comprehensive Asset Management Varies 21

Objectives, Scope, and Methodology 22

Comments from the Environmental Protection Agency 25

Chapter 2

Water Industry 

Officials Report Many 

Benefits from Asset 

Management Despite 

Implementation 

Challenges

26

Utilities Cite Many Benefits from Asset Management and Some 

Cautions About Reported Savings 26

Utilities Face Challenges in Successfully Implementing 

Comprehensive Asset Management 36
Contents

Page ii GAO-04-461 Water Utility Asset Management

Chapter 3

EPA Can Encourage 

Water Utilities to Use 

Asset Management by 

Strengthening Existing 

Initiatives

47

EPA Sponsors Several Initiatives to Promote Utilities’ Use of Asset 

Management 47

EPA’s Efforts to Promote Asset Management Could Be Strengthened 

by Leveraging Ongoing Efforts Within and Outside the Agency 51

Water Industry Officials Favor an Expanded Role for EPA in 

Promoting Asset Management, but Raised Concerns About 

Additional Regulatory Requirements 54

Conclusions 58

Recommendations for Executive Action 59

Appendixes

Appendix I: Utilities Selected for Structured Interviews 60

Appendix II: GAO Contacts in Australia and New Zealand 61

Appendix III: GAO Contacts and Staff Acknowledgments 62

GAO Contacts 62

Staff Acknowledgments 62

Tables Table 1: Recent Estimates of the Cost of Meeting Infrastructure 

Needs at Drinking Water and Wastewater Utilities 13

Table 2: Typical Sources of Data for a Central Asset Inventory 40

Figure Figure 1: Elements of Comprehensive Asset Management 18

Abbreviations

EPA Environmental Protection Agency

GAO General Accounting Office

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page 1 GAO-04-461 Water Utility Asset Management

United States General Accounting Office

Washington, D.C. 20548

A

March 19, 2004 Letr

The Honorable James M. Jeffords

Ranking Minority Member

Committee on Environment and Public Works

United States Senate

Dear Senator Jeffords:

In response to your request, this report examines (1) the potential benefits 

of comprehensive asset management for drinking water and wastewater 

utilities and the challenges that could hinder its implementation and (2) the 

role that the federal government might play in encouraging utilities to 

implement asset management.

Unless you publicly announce its contents earlier, we plan no further 

distribution of this report until 30 days from the date of this letter. At that 

time, we will send copies to appropriate congressional committees, the 

Administrator of the Environmental Protection Agency, and the Director of 

the Office of Management and Budget. We will also make copies available 

to others upon request. In addition, the report will be available at no 

charge on the GAO Web site at http://www.gao.gov.

Please call me at (202) 512-3841 if you or your staff have any questions. 

Major contributors to this report are listed in appendix III.

Sincerely yours,

John B. Stephenson

Director, Natural Resources

 and Environment
Page 2 GAO-04-461 Water Utility Asset Management

Executive Summary

Purpose Mounting evidence suggests that the integrity of the nation’s drinking water 

and wastewater infrastructure is at risk without a concerted effort to 

improve the management of key assets—pipelines, treatment plants, and 

other facilities—and a significant investment in maintaining, rehabilitating, 

and replacing these assets. According to recent studies by the 

Environmental Protection Agency (EPA) and other organizations, drinking 

water and wastewater utilities will need to invest hundreds of billions of 

dollars in their capital infrastructure over the next two decades. However, 

if utilities maintain current spending levels, financing the needed 

investments could be problematic. Based on a survey of several thousand 

drinking water and wastewater utilities, GAO reported in August 2002 that 

a significant percentage of the utilities—29 percent of the drinking water 

utilities and 41 percent of the wastewater utilities—were not generating 

enough revenue from user rates and other local sources to cover their full 

cost of service.1

 Furthermore, roughly one-third of the utilities 

(1) deferred maintenance because of insufficient funding, (2) had 

20 percent or more of their pipelines nearing the end of their useful life, and 

(3) lacked basic plans for managing their capital assets. 

Each year, the federal government makes available billions of dollars to 

help local communities finance drinking water and wastewater 

infrastructure projects. However, concerns about the condition of existing 

infrastructure have prompted calls to increase this financial assistance and, 

at the same time, ensure that the federal government’s investment is 

protected. The Congress has been considering a number of infrastructurerelated proposals, including requirements for local utilities to have asset 

management plans. Some utilities have turned to comprehensive asset 

management on their own initiative. This approach to managing capital 

infrastructure focuses on minimizing the total cost of acquiring, operating, 

maintaining, replacing, and disposing of capital assets over their life cycle 

and doing so in a way that achieves the level of service customers desire. 

Among other things, comprehensive asset management allows utility 

managers to obtain better information on the age and condition of existing 

assets, determine the level of maintenance needed to optimize asset 

performance and useful life, assess the risks associated with the failure of 

various assets and set priorities for their maintenance and replacement, 

understand the trade-offs and implications of management decisions about 

1

See U.S. General Accounting Office, Water Infrastructure: Information on Financing, 

Capital Planning, and Privatization, GAO-02-764 (Washington, D.C.: Aug. 16, 2002).
Executive Summary

Page 3 GAO-04-461 Water Utility Asset Management

the assets, and use better information to justify proposed rate increases or 

capital investments. Water industry officials agree that by making 

informed decisions about investments in capital assets, drinking water and 

wastewater utilities can better justify the rate increases associated with 

making needed improvements to their infrastructure. 

The Ranking Minority Member of the Senate Committee on Environment 

and Public Works asked GAO to examine (1) the potential benefits of 

comprehensive asset management for drinking water and wastewater 

utilities and the challenges that could hinder its implementation and (2) the 

role that the federal government might play in encouraging utilities to 

implement asset management. 

To address the first issue, GAO conducted initial interviews with 46 U.S. 

drinking water and wastewater utilities identified by knowledgeable 

government and water industry officials as implementing comprehensive 

asset management. To obtain more detailed information on the benefits 

and challenges associated with implementing asset management, GAO 

conducted structured interviews with 15 of these utilities, selected because 

they (1) reported or anticipated achieving quantitative benefits from asset 

management or (2) represented smaller entities. Our results are not 

generalizable to the larger universe of domestic drinking water and 

wastewater utilities. Because asset management is a relatively new 

concept for domestic water utilities, GAO supplemented the structured 

interviews by obtaining information from 6 utilities and five government 

agencies in Australia and New Zealand—two countries that have taken the 

lead in implementing comprehensive asset management in their drinking 

water and wastewater utilities—and two private companies with longstanding experience in using comprehensive asset management in their 

respective fields, which provided additional information on benefits and 

challenges. 

To address the second issue, GAO discussed options for a federal role in 

promoting asset management with the 15 utilities selected for structured 

interviews, water industry associations, and EPA. In addition, based on 

contacts with a variety of organizations and officials experienced in asset 

management, GAO identified the U.S. Department of Transportation as 

being at the forefront of federal involvement in this issue. GAO obtained 

information about the department’s initiatives from the Office of Asset 

Management, within the Federal Highway Administration. 
Executive Summary

Page 4 GAO-04-461 Water Utility Asset Management

We conducted our work between March 2003 and March 2004 in 

accordance with generally accepted government auditing standards.

Background At its most basic level, comprehensive asset management involves the 

systematic collection of key data and the application of analytical tools 

such as life-cycle cost analysis and risk assessment. Asset management 

thus provides information that managers can use to make sound decisions 

about their capital assets and allows decision makers to better identify and 

manage needed investments in their organization’s infrastructure. By 

following this approach, organizations also change the process they use to 

make decisions, including the types of information they bring to bear and 

which segments of the organization participate in the decision-making 

process. Using a fully integrated decision process, many segments of an 

organization, including accounting, engineering, finance, maintenance, and 

operations, are expected to exchange relevant information, share in the 

decision making, and take an organizationwide view when setting goals 

and priorities. For drinking water and wastewater utilities, an integral part 

of a comprehensive asset management program is ensuring that adequate 

funds are available through user rates or other means so that asset 

management decisions can be implemented (e.g., ensuring that planned 

maintenance can be conducted and capital assets can be repaired, 

replaced, or upgraded on schedule).

Comprehensive asset management is a relatively new concept for drinking 

water and wastewater utilities in the United States. Domestic utilities 

implementing asset management are generally large and vary considerably 

in terms of their approach. For example, some are applying the concepts of 

asset management on a utilitywide basis and others are beginning in 

specific departments or facilities. In implementing asset management, 

domestic utility managers have drawn from the experiences of 

international utilities that are considered to be at the forefront of asset 

management for drinking water and wastewater infrastructure. For 

example, in Australia and New Zealand, where the concept has been 

strongly endorsed by the national governments, water utilities have used 

comprehensive asset management for about 10 years. In each country, a 

key impetus for the move toward asset management was legislation that 

called for water utilities to improve their financial management, requiring 

utilities to recover the full cost of service in Australia and, in New Zealand, 

to annually depreciate their assets and use cost-benefit analysis. 
Executive Summary

Page 5 GAO-04-461 Water Utility Asset Management

In the United States, the Congress has been considering proposals to 

require utilities to adopt key components of asset management, such as 

inventorying critical assets, evaluating their condition and performance, 

and developing plans to (1) maintain, repair, and replace assets and (2) 

fund such activities. These proposals typically link the use of asset 

management to a utility’s eligibility for federal financial assistance in 

making infrastructure improvements.

The universe of drinking water and wastewater utilities indicates that 

efforts to adopt asset management may vary considerably because of the 

utilities’ sizes and their ability to marshal resources for the effort. In the 

United States, about 54,000 community water systems supply most of the 

nation’s drinking water and about 16,000 wastewater treatment systems 

provide sewer service. Larger utilities account for much of the projected 

infrastructure needs; for example, drinking water systems serving more 

than 10,000 people account for approximately 65 percent of the estimated 

needs for such utilities. However, most utilities are small, with 93 percent 

of community drinking water systems and 71 percent of wastewater 

systems serving 10,000 people or fewer. EPA has found that smaller 

utilities are less likely to have the financial, managerial, and technical 

capacity to meet regulatory requirements and are less likely to cover their 

full cost of providing services. 

Results in Brief U.S. drinking water and wastewater utilities that GAO contacted reported 

benefiting from applying the concepts of asset management to their 

operations but have also encountered certain challenges. Utilities are 

seeing benefits from (1) improved decision making because they have more 

accurate and integrated information about their capital assets and (2) more 

productive relationships with governing authorities, ratepayers, and other 

stakeholders because they can provide better information in a more 

transparent way. For example, utilities reported that collecting accurate 

data about their assets provides a better understanding of their 

maintenance, rehabilitation, and replacement needs, which helps utility 

managers make better investment decisions. While water industry officials 

identified financial and other benefits from using asset management, 

reported savings should be interpreted carefully. According to the utilities 

that GAO contacted, the challenges associated with implementing asset 

management included collecting and managing needed data and making 

the cultural changes necessary to integrate information and decision 

making across departments. Utilities also reported that the shorter-term 

focus of their governing bodies can hamper long-term planning efforts. 
Executive Summary

Page 6 GAO-04-461 Water Utility Asset Management

Although smaller utilities face more obstacles to implementing asset 

management, largely as a result of limited resources, such utilities can also 

benefit from applying asset management concepts.

EPA can play a stronger role in encouraging water utilities to use asset 

management by leveraging ongoing efforts within and outside the agency. 

EPA currently sponsors initiatives to promote the use of asset 

management, such as developing educational materials; providing 

technical assistance, particularly to smaller utilities; and funding research 

related to asset management. Nevertheless, GAO found that some 

activities could be better coordinated. For example, EPA’s Office of 

Ground Water and Drinking Water and Office of Wastewater Management 

fund state and university-based training and technical assistance centers 

that have developed guidance manuals, tools, and training materials to 

assist small utilities with asset management. However, no central 

repository exists to facilitate information sharing within and across the 

drinking water and wastewater programs and thereby avoid duplication of 

effort. GAO also found that opportunities exist for EPA to coordinate with 

other federal agencies, such as the Department of Transportation, that have 

already developed tools and training materials on asset management. 

When asked for their views on a potential federal role in asset 

management, water industry officials said that EPA should assume a 

greater leadership role in promoting asset management. For example, they 

see asset management as a tool to help utilities meet regulatory 

requirements that depend on maintaining an adequate infrastructure and 

believe that EPA should establish a Web site to serve as a central repository 

of information on implementing asset management. However, the officials 

raised concerns about the implications of mandating asset management, 

citing challenges in defining an adequate asset management plan and in the 

ability of states to oversee and enforce compliance. GAO is making 

recommendations to strengthen EPA’s existing efforts to promote water 

utilities’ use of asset management. 
Executive Summary

Page 7 GAO-04-461 Water Utility Asset Management

Principal Findings

Utilities See Benefits from 

Using Comprehensive Asset 

Management, but Face 

Implementation Challenges

Utilities that have started using comprehensive asset management report 

benefits for several aspects of their operations. For example, collecting, 

sharing, and analyzing data on capital assets has allowed utilities to make 

more informed decisions about how best to manage the assets. In 

particular, utilities are using the information they collect to allocate their 

maintenance resources more effectively and make better decisions about 

whether to rehabilitate or replace aging assets. Utilities also report that 

asset management fosters information sharing across departments as well 

as coordinated planning and decision making. These improvements help 

utility managers reduce duplication of effort and improve the allocation of 

staff time and other resources. 

Utilities also report that comprehensive asset management benefits their 

relations with external stakeholders, such as local governing bodies, 

ratepayers, and credit rating agencies. For instance, several utilities have 

used, or expect to use, the information collected through comprehensive 

asset management to persuade elected officials to increase user rates to 

help pay for needed improvements in drinking water and wastewater 

infrastructure. Although water industry officials identified financial and 

other benefits from using asset management, reported savings should be 

viewed with caution because, for instance, comprehensive asset 

management may be implemented concurrently with other changes in 

management practices or operational savings may be offset by increases in 

capital expenditures.

Despite the acknowledged benefits of comprehensive asset management, 

utilities report several key challenges that can hinder efforts to implement 

this approach. For example, collecting the appropriate data on utility 

assets and managing the information efficiently can be difficult when 

existing data are incomplete and inaccurate or the data come from multiple 

departments and are maintained using different and incompatible software 

programs. Utilities reported that another major challenge is overcoming 

resistance to cultural change and fostering more communication among 

departments that do not regularly exchange information. Utility officials 

believe that it is essential to change the management culture to encourage 

more interdepartmental coordination and information sharing. Finally, 

although asset management provides utilities with better information to 

justify needed rate increases, their justifications may not be effective 
Executive Summary

Page 8 GAO-04-461 Water Utility Asset Management

because of pressure to keep rates low and competing priorities for local 

revenues. Utility and water industry officials cited the difficulty of trying to 

implement long-term capital improvement plans when governing bodies 

have a shorter-term focus as a key challenge to asset management. Smaller 

utilities may have more difficulty implementing asset management because 

they typically have fewer financial, technological, and staff resources. On 

the other hand, because such utilities have fewer capital assets to manage, 

they can turn to low-cost management alternatives that do not require 

expensive or sophisticated technology.

EPA Can Promote the Use 

of Asset Management By 

Strengthening Existing 

Initiatives

EPA currently sponsors initiatives to encourage the use of comprehensive 

asset management through its partnerships with water industry 

associations and state and university-based training and technical 

assistance centers. These initiatives include developing training and 

informational materials, providing technical assistance, and funding 

research related to asset management. While this is a good first step, GAO 

found that better coordination of these efforts within and across the 

drinking water and wastewater programs could reduce the potential for 

duplication of effort and help ensure that limited resources are used 

effectively. GAO also found opportunities for EPA to leverage its resources 

by adapting the asset management tools and informational materials 

available from other federal agencies with experience in asset 

management, such as the Federal Highway Administration in the 

Department of Transportation. 

When asked for their views on a potential federal role, water industry and 

utility officials said that given the benefits of asset management, it is in 

EPA’s interest to assume a greater leadership role in promoting its use. For 

example, the officials indicated that one useful option would be educating 

utilities about the potential for asset management to help them comply 

with certain regulatory requirements that focus to some degree on the 

adequacy of utility infrastructure and the management practices that affect 

it. As a case in point, the officials cited requirements for ensuring that 

drinking water utilities have the financial, managerial, and technical 

capacity they need to provide safe drinking water over the long term. GAO 

also found support for an EPA Web site that would serve as a central 

repository of information on comprehensive asset management and 

provide drinking water and wastewater utilities with direct and easy access 

to implementation tools and training materials developed by EPA and 

others. Water industry associations and individual utilities questioned the 

feasibility of proposed requirements for asset management plans, 
Executive Summary

Page 9 GAO-04-461 Water Utility Asset Management

particularly as a condition of receiving federal financial assistance. While 

the proposals are consistent with what GAO has found to be the leading 

practices in capital decision making,2

 the officials expressed concerns 

about, among other things, (1) whether state regulators have the resources 

to assess the adequacy of asset management plans and oversee compliance 

and (2) the potential for a mandate to limit the flexibility utilities need to 

tailor asset management to their individual circumstances.

Recommendations for 

Executive Action

Given the potential of comprehensive asset management to help water 

utilities better identify and manage their infrastructure needs, the 

Administrator, EPA, should take steps to strengthen the agency’s existing 

initiatives on asset management and ensure that relevant information is 

accessible to those who need it. Specifically, the Administrator should

• better coordinate ongoing and planned initiatives to promote asset 

management within and across the drinking water and wastewater 

programs to leverage limited resources and reduce the potential for 

duplication; 

• explore opportunities to take advantage of asset management tools and 

informational materials developed by other federal agencies;

• strengthen efforts to educate utilities on how implementing asset 

management can help them comply with certain regulatory 

requirements that focus in whole or in part on the adequacy of utility 

infrastructure and the management practices that affect it; and 

• establish a Web site to provide a central repository of information on 

comprehensive asset management so that drinking water and 

wastewater utilities have direct and easy access to information that will 

help them better manage their infrastructure.

Agency Comments GAO provided a draft of this report to EPA for review and comment. GAO 

received comments from officials within EPA’s Office of Water and Office 

of the Chief Financial Officer, who generally agreed with the information 

2

See U.S. General Accounting Office, Executive Guide: Leading Practices in Capital 

Decision-Making, GAO/AIMD-99-32 (Washington, D.C.: December 1998).
Executive Summary

Page 10 GAO-04-461 Water Utility Asset Management

presented in the report and GAO’s recommendations. They further noted 

that while EPA has played a major role in bringing asset management 

practices to the water industry, significant additional activity could be 

undertaken, and they have placed a high priority on initiating activities 

similar to those suggested by GAO. The officials also made technical 

comments, which GAO incorporated as appropriate.
Page 11 GAO-04-461 Water Utility Asset Management

Chapter 1

Introduction Chapte1r

Drinking water and wastewater utilities are facing potentially significant 

investments over the next 20 years to upgrade an aging and deteriorated 

infrastructure, including underground pipelines, treatment, and storage 

facilities; meet new regulatory requirements; serve a growing population; 

and improve security. Adding to the problem is that many utilities have not 

been generating enough revenues from user charges and other local 

sources to cover their full cost of service. As a result, utilities have 

deferred maintenance and postponed needed capital improvements. To 

address these problems and help ensure that utilities can manage their 

needs cost-effectively, some water industry and government officials 

advocate the use of comprehensive asset management. Asset management 

is a systematic approach to managing capital assets in order to minimize 

costs over the useful life of the assets while maintaining adequate service 

to customers. While the approach is relatively new to the U.S. water 

industry, it has been used by water utilities in other countries for as long as 

10 years. 

Each year, the federal government makes available billions of dollars to 

help local communities finance drinking water and wastewater 

infrastructure projects. Concerns about the condition of existing 

infrastructure have prompted calls to increase financial assistance and, at 

the same time, ensure that the federal government’s investment is 

protected. In recent years the Congress has been considering a number of 

proposals that would promote the use of comprehensive asset management 

by requiring utilities to develop and implement plans for maintaining, 

rehabilitating, and replacing capital assets, often as a condition of obtaining 

loans or other financial assistance. 
Chapter 1

Introduction

Page 12 GAO-04-461 Water Utility Asset Management

The Federal 

Government Has 

Played a Major Role in 

Funding and Setting 

Requirements for 

Water Infrastructure

The federal government has had a significant impact on the nation’s 

drinking water and wastewater infrastructure by (1) providing financial 

assistance to build new facilities and (2) establishing regulatory 

requirements that affect the technology, maintenance, and operation of 

utility infrastructure. As we reported in 2001, nine federal agencies made 

available about $46.6 billion for capital improvements at water utilities 

from fiscal years 1991 through 2000.1

 The Environmental Protection 

Agency (EPA) and the Department of Agriculture alone accounted for over 

85 percent of the assistance, providing $26.4 billion and $13.3 billion, 

respectively, during the 10-year period; since then, the funding from these 

two agencies has totaled nearly $15 billion.2

 EPA’s financial assistance is 

primarily in the form of grants to the states to capitalize the Drinking Water 

and Clean Water State Revolving Funds, which are used to finance 

improvements at local drinking water and wastewater treatment facilities, 

respectively.3

 As part of the Rural Community Advancement Program, 

Agriculture’s Rural Utilities Service provides direct loans, loan guarantees, 

and grants to construct or improve drinking water, sanitary sewer, solid 

waste, and storm drainage facilities in rural communities. 

In addition to its financial investment, EPA has promulgated regulations to 

implement the Safe Drinking Water Act and Clean Water Act, which have 

been key factors in shaping utilities’ capital needs and management 

practices. For example, under the Safe Drinking Water Act, EPA has set 

standards for the quality of drinking water and identified effective 

technologies for treating contaminated water. Similarly, under the Clean 

Water Act, EPA has issued national minimum technology requirements for 

municipal wastewater utilities and criteria that states use to establish water 

quality standards that affect the level of pollutants that such utilities are 

permitted to discharge. Thus, the federal government has a major stake in 

protecting its existing investment in water infrastructure and ensuring that 

1

See U.S. General Accounting Office, Water Infrastructure: Information on Federal and 

State Financial Assistance, GAO-02-134 (Washington, D.C.: Nov. 30, 2001). We adjusted the 

dollar amounts from the report to constant 2003 dollars.

2

From fiscal year 2001 to fiscal year 2004, EPA provided $8.8 billion for water infrastructure 

and Agriculture provided $6 billion, in constant 2003 dollars.

3

The Clean Water State Revolving Fund may also be used for other water quality 

improvement projects, such as nonpoint source pollution control and estuary management, 

in addition to wastewater treatment facilities.
Chapter 1

Introduction

Page 13 GAO-04-461 Water Utility Asset Management

future investments go to utilities that are built and managed to meet key 

regulatory requirements.

Projected Drinking 

Water and Wastewater 

Infrastructure Needs 

Are Significant

Drinking water and wastewater utilities will need to invest hundreds of 

billions of dollars in their capital infrastructure over the next two decades, 

according to EPA; the Congressional Budget Office; and the Water 

Infrastructure Network, a consortium of industry, municipal, state, and 

nonprofit associations. As table 1 shows, the projected needs range from 

$485 billion to nearly $1.2 trillion. The estimates vary considerably, 

depending on assumptions about the nature of existing capital stock, 

replacement rates, and financing costs. Given the magnitude of the 

projected needs, it is important that utilities adopt a strategy to manage the 

repair and replacement of key assets as cost-effectively as possible and to 

plan to sustain their infrastructure over the long term. 

Table 1: Recent Estimates of the Cost of Meeting Infrastructure Needs at Drinking Water and Wastewater Utilities

Source: GAO summary of infrastructure estimates from the Congressional Budget Office, EPA, and the Water Infrastructure Network.

Note: We did not assess the reliability of these data. 

a

See Congressional Budget Office, Future Investment in Drinking Water and Wastewater 

Infrastructure, (Washington, D.C.: November 2002). According to the report, the difference between 

the low and high estimates is attributable primarily to assumptions about the rate at which drinking 

water pipes are replaced, the savings associated with improved efficiency, the costs of controlling 

combined sewer overflows, and the length of the borrowing term. The estimates represent 

infrastructure costs as financed and thus include the estimated debt service paid from 2000 to 2019, 

whether for newly built projects or projects built before 2000.

Dollars in billions

Organization

Estimate

Period 

covered

Capital investment only Capital investment and financing

Drinking 

water Wastewater Total

Drinking 

water Wastewater Total

Congressional Budget 

Officea 2000-2019

--Low 232 260 492

--High 402 418 820

EPAb 2000-2019

--Low 154 331 485 178 402 580

--High 446 450 896 475 719 1,194

Water Infrastructure 

Networkc 2000-2019 380 360 740 480 460 940
Chapter 1

Introduction

Page 14 GAO-04-461 Water Utility Asset Management

b

See U.S. Environmental Protection Agency, The Clean Water and Drinking Water Infrastructure Gap 

Analysis, EPA-816-R-02-020 (September 2002). According to the report, the difference between the 

low and high estimates is attributable to differing assumptions about infrastructure replacement rates.

c

See Water Infrastructure Network, Clean & Safe Water for the 21st Century (April 2000). The 

estimates for capital investment and financing represent the capital costs associated with all 

investments during the 2000-2019 period as well as the interest paid over time on those investments. 

They differ from costs-as-financed estimates because they include debt service (principal and interest) 

paid after 2019 on investments during the two decades instead of debt service paid during that time on 

pre-2000 investments.

Local drinking water and wastewater utilities rely primarily on revenues 

from user rates to pay for infrastructure improvements. According to EPA’s 

gap analysis, maintaining utility spending at current levels could result in a 

funding gap of up to $444 billion between projected infrastructure needs 

and available resources.4

 However, EPA also estimates that if utilities’ 

infrastructure spending grows at a rate of 3 percent annually over and 

above inflation, the gap will narrow considerably and may even disappear. 

EPA’s report concludes that utilities will need to use some combination of 

increased spending and innovative management practices to meet the 

projected needs.

The nation’s largest utilities—those serving populations of at least 10,000—

account for most of the projected infrastructure needs. For example, 

according to EPA data, large drinking water systems represent about 

7 percent of the total number of community water systems, but account for 

about 65 percent of the estimated infrastructure needs. Similarly, about 

29 percent of the wastewater treatment and collection systems are 

estimated to serve populations of 10,000 or more, and such systems 

account for approximately 89 percent of projected infrastructure needs for 

wastewater utilities. Most of the U.S. population is served by large drinking 

water and wastewater utilities; for example, systems serving at least 

10,000 people provide drinking water to over 80 percent of the population.

Pipeline rehabilitation and replacement represents a significant portion of 

the projected infrastructure needs. According to the American Society of 

Civil Engineers, U.S. drinking water and wastewater utilities are 

responsible for an estimated 800,000 miles of water delivery pipelines and 

between 600,000 and 800,000 miles of sewer pipelines, respectively. 

According to the most recent EPA needs surveys, the investment needed 

4

Simply stated, the funding gap is equal to the estimated infrastructure needs less projected 

spending.
Chapter 1

Introduction

Page 15 GAO-04-461 Water Utility Asset Management

for these pipelines from 1999 through 2019 could be as much as 

$137 billion.5

Several recent studies have raised concerns about the condition of the 

existing pipeline network. For example, in August 2002, we reported the 

results of a nationwide survey of large drinking water and wastewater 

utilities.6

 Based on the survey, more than one-third of the utilities had 

20 percent or more of their pipelines nearing the end of their useful life; and 

for 1 in 10 utilities, 50 percent or more of their pipelines were nearing the 

end of their useful life. In 2001, a major water industry association 

predicted that drinking water utilities will face significant repair and 

replacement costs over the next three decades, given the average life 

estimates for different types of pipelines and the years since their original 

installation.7

 Other studies have made similar predictions for the pipelines 

owned by wastewater utilities. 

Many Factors Have 

Contributed to 

Deteriorating Utility 

Infrastructure

EPA and water industry officials cite a variety of factors that have played a 

role in the deterioration of utility infrastructure; most of these factors are 

linked to the officials’ belief that the level of ongoing investment in the 

infrastructure has not been sufficient to sustain it. For example, according 

to EPA’s Assistant Administrator for Water, the pipelines and plants that 

make up the nation’s water infrastructure are aging, and maintenance is too 

often deferred. He predicted that consumers will face sharply rising costs 

to repair and replace the infrastructure. Similarly, as the Water 

Environment Research Foundation reported in 2000, “years of reactive

5

U.S. Environmental Protection Agency, Drinking Water Infrastructure Needs Survey: 

Second Report to Congress, EPA 816-R-01-004 (Washington, D.C.: February 2001) and U.S. 

Environmental Protection Agency, Clean Watersheds Needs Survey 2000: Report to 

Congress, EPA 832-R-03-001 (Washington, D.C.: August 2003). 

6

See GAO-02-764, 3. We sent questionnaires to 1,425 drinking water systems and 2,391 

wastewater systems serving more than 10,000 people. In our analysis, utilities were 

weighted to account statistically for all utilities serving populations greater than 10,000, 

including those not selected for our sample. 

7

American Water Works Association Water Industry Technical Action Fund, Dawn of the 

Replacement Era: Reinvesting in Drinking Water Infrastructure (Denver, Colo.: May 

2001).
Chapter 1

Introduction

Page 16 GAO-04-461 Water Utility Asset Management

maintenance and minimal expenditures on sewers have left a huge backlog 

of repair and renewal work.”8

 

Our nationwide survey of large drinking water and wastewater utilities 

identified problems with the level of revenues generated from user rates 

and decisions on investing these revenues.9

 For example: 

• Many drinking water and wastewater utilities do not cover the full cost 

of service—including needed capital investments and operation and 

maintenance costs—through their user charges. Specifically, a 

significant percentage of the utilities serving populations of 10,000 or 

more—29 percent of the drinking water utilities and 41 percent of the 

wastewater utilities—were not generating enough revenue from user 

charges and other local sources to cover their costs. 

• Many drinking water and wastewater utilities defer maintenance and 

needed capital improvements because of insufficient funding. About 

one-third of the utilities deferred maintenance expenditures in their 

most recent fiscal year;10 similar percentages of utilities reported 

deferring minor capital improvements and major capital improvements. 

About 20 percent of the utilities had deferred expenditures in all three 

categories. 

• For many utilities, a significant disparity exists between the actual 

rehabilitation and replacement of their pipelines and the rate at which 

utility managers believe rehabilitation and replacement should occur. 

We found that only about 40 percent of the drinking water utilities and 

35 percent of the wastewater utilities met or exceeded their desired rate 

of pipeline rehabilitation and replacement. The remaining utilities did 

not meet their desired rates. Roughly half of the utilities actually 

rehabilitated or replaced 1 percent or less of their pipelines annually.

Utility managers also lack the information they need to manage their 

existing capital assets. According to our survey, many drinking water and 

8

Water Environment Research Foundation, New Pipes for Old: A Study of Recent Advances 

in Sewer Pipe Materials and Technology (2000), 4-1.

9

GAO-02-764, 7, 35, 42.

10We do not have specific information on the fiscal years covered in utilities’ responses; 

however, we sent our survey out during September 2001. 
Chapter 1

Introduction

Page 17 GAO-04-461 Water Utility Asset Management

wastewater utilities either do not have plans for managing their assets or 

have plans that may not be adequate in scope or content. Specifically, 

nearly one-third of the utilities did not have plans for managing their 

existing capital assets. Moreover, for the utilities that did have such plans, 

the plans in many instances did not cover all assets or did not contain one 

or more key elements, such as an inventory of assets, assessment criteria, 

information on the assets’ condition, and the planned and actual 

expenditures to maintain the assets.11 

Comprehensive Asset 

Management Focuses 

on Efficiently 

Managing Capital 

Assets

Comprehensive asset management has gained increasing recognition 

within the water industry as an approach that could give utilities the 

information and analytical tools they need to manage existing assets more 

effectively and plan for future needs. Using asset management concepts, 

utilities and other organizations responsible for managing capital 

infrastructure can minimize the total cost of designing, acquiring, 

operating, maintaining, replacing, and disposing of capital assets over their 

useful lives, while achieving desired service levels. Figure 1 shows some of 

the basic elements of comprehensive asset management and how the 

elements build on and complement each other to form an integrated 

management system. 

11For the purposes of our survey, we focused on the asset planning elements identified by 

the Governmental Accounting Standards Board in a June 30, 1999, statement that made 

comprehensive changes in state and local governments’ financial reporting requirements. 

Among other things, it requires, for the first time, the governments to report information 

about public infrastructure assets, including their drinking water and wastewater facilities. 

Specifically, the governments must begin reporting depreciation of their capital assets or 

implement an asset management system. See Governmental Accounting Standards Board 

Statement No. 34, Basic Financial Statements—and Management’s Discussion and 

Analysis—for State and Local Governments.
Chapter 1

Introduction

Page 18 GAO-04-461 Water Utility Asset Management

Figure 1: Elements of Comprehensive Asset Management

Comprehensive 

Asset 

Management

Collect and organize information 

on assets

Analyze data to set priorities and 

make decisions about assets

Integrate data and decision making 

across the organization

Link strategy for addressing 

infrastructure needs

Service goals

Operating budget

Capital improvement plan

Description

Condition

Value

Compatible data

Unique identifiers

Consistent organization

Life-cycle cost

Risk assessment

Source: GAO.
Chapter 1

Introduction

Page 19 GAO-04-461 Water Utility Asset Management

Experts within and outside the water industry have published manuals and 

handbooks on asset management practices and how to apply them.12 While 

the specific terminology differs, some fundamental elements of 

implementing asset management appear consistently in the literature. 

• Collecting and organizing detailed information on assets. Collecting 

basic information about capital assets helps managers identify their 

infrastructure needs and make informed decisions about the assets. An 

inventory of an organization’s existing assets generally should include 

(1) descriptive information about the assets, including their age, size, 

construction materials, location, and installation date; (2) an assessment 

of the assets’ condition, along with key information on operating, 

maintenance, and repair history, and the assets’ expected and remaining 

useful life; and (3) information on the assets’ value, including historical 

cost, depreciated value, and replacement cost. 

• Analyzing data to set priorities and make better decisions about 

assets. Under asset management, managers apply analytical techniques 

to identify significant patterns or trends in the data they have collected 

on capital assets; help assess risks and set priorities; and optimize 

decisions on maintenance, repair, and replacement of the assets. For 

example: 

• Life-cycle cost analysis. Managers analyze life-cycle costs to decide 

which assets to buy, considering total costs over an asset’s life, not 

just the initial purchase price. Thus, when evaluating investment 

alternatives, managers also consider differences in installation cost, 

operating efficiency, frequency of maintenance and repairs, and other 

factors to get a cradle-to-grave picture of asset costs. 

• Risk/criticality assessment. Managers use risk assessment to 

determine how critical the assets are to their operations, considering 

both the likelihood that an asset will fail and the consequences—in 

12For example, see (1) Managing Public Infrastructure Assets to Minimize Cost and 

Maximize Performance, developed by the Association of Metropolitan Sewerage Agencies 

in partnership with the American Water Works Association, the Association of Metropolitan 

Water Agencies, and the Water Environment Federation (2002); (2) International 

Infrastructure Management Manual, published jointly by the Association of Local 

Government Engineering New Zealand, Inc., and the Institute of Public Works Engineering 

of Australia (2002); (3) Asset Management Primer, published by the U.S. Department of 

Transportation (December 1999); and (4) Executive Guide: Leading Practices in Capital 

Decision-Making, published by GAO (GAO/AIMD-99-32; December 1998).
Chapter 1

Introduction

Page 20 GAO-04-461 Water Utility Asset Management

terms of costs and impact on the organization’s desired level of 

service—if the asset does fail.13 Based on this analysis, managers set 

priorities and target their resources accordingly. 

• Integrating data and decision making across the organization. 

Managers ensure that the information collected within an organization 

is consistent and organized so that it is accessible to the people who 

need it. Among other things, the organization’s databases should be 

fully integrated; for instance, financial and engineering data should be 

compatible, and ideally each asset should have a unique identifier that is 

used throughout the organization. Regarding decision making, all 

appropriate units within an organization should participate in key 

decisions, which ensures that all relevant information gets considered 

and encourages managers to take an organizationwide view when 

setting goals and priorities. 

• Linking strategy for addressing infrastructure needs to service goals, 

operating budgets, and capital improvement plans. An organization’s 

goals for its desired level of service—in terms of product quality 

standards, frequency of service disruptions, customer response time, or 

other measures—are a major consideration in the organization’s 

strategy for managing its assets. As managers identify and rank their 

infrastructure needs, they determine the types and amount of 

investments needed to meet the service goals. Decisions on asset 

maintenance, rehabilitation, and replacement are, in turn, linked to the 

organization’s short- and long-term financial needs and are reflected in 

the operating budget and capital improvement plan, as appropriate. 

Implementing the basic elements of asset management is an iterative 

process that individual organizations may begin at different points. Within 

the water industry, for example, some utilities may start out by identifying 

their infrastructure needs, while other utilities may take their first step by 

setting goals for the level of service they want to provide. The 

interrelationship between the elements of asset management can alter an 

organization’s strategy for managing its assets. For example, once an 

organization has completed a risk assessment, it may scale back its efforts 

to compile a detailed inventory of assets to focus initially on those assets 

13For example, in the case of a drinking water utility, a water main serving the local hospital 

might be identified as a critical asset because the consequences of a water main break could 

be significant.
Chapter 1

Introduction

Page 21 GAO-04-461 Water Utility Asset Management

determined to be critical. Similarly, as information on infrastructure needs 

and priorities improves, managers reexamine the level of planned 

investments, considering the impact on both revenue requirements and the 

level of service that can be achieved. According to advocates of asset 

management, while many organizations are implementing certain aspects 

of the process, such as maintaining an inventory of assets and tracking 

maintenance, these organizations are not realizing the full potential of 

comprehensive asset management unless all of the basic elements work 

together as an integrated management system.

Strategy for Adopting 

and Progress toward 

Implementing 

Comprehensive Asset 

Management Varies 

As the description of asset management indicates, implementing this 

approach is not a step-by-step, linear process. Asset management is an 

integrated system that utilities and other organizations can implement in a 

number of different ways, depending on what makes sense for their 

particular organization. In the United States, some drinking water and 

wastewater utilities, for example, are taking a more strategic approach, 

initially investing their resources in planning for asset management. Other 

utilities are focusing initially on collecting data. Another variation is that 

some utilities are adopting asset management on a utilitywide basis, while 

others are piloting the approach at a single facility or department or are 

targeting critical assets utilitywide. The level of sophistication with which 

asset management concepts are applied within a utility can also vary, 

depending on the size and complexity of the operations and the resources 

that the utility can devote to implementation. 

Comprehensive asset management is a relatively new concept for drinking 

water and wastewater utilities in the United States. According to EPA and 

major water industry organizations, few utilities are implementing 

comprehensive asset management, and those that have done so are almost 

exclusively larger entities. In addition, for the most part, the domestic 

utilities that have adopted asset management are in the early stages of 

implementation. Few utilities have been involved in the process for longer 

than 2 to 3 years.

Although relatively new to the U.S. water industry, comprehensive asset 

management has been used for about 10 years by water utilities in Australia 

and New Zealand, where the national governments have strongly endorsed 

the concept. In each case, the driving force behind the use of asset 

management was legislation that called for water utilities to improve their 

financial management. In Australia, the law requires utilities to recover the 

full cost of service, while in New Zealand the law requires utilities to 
Chapter 1

Introduction

Page 22 GAO-04-461 Water Utility Asset Management

depreciate their assets annually and use cost-benefit analysis, among other 

things. The national governments of Australia and New Zealand each 

published guidebooks on asset management, and engineering groups in the 

two countries jointly developed a comprehensive manual on managing 

infrastructure assets.14

Asset management is seen as a means of improving utility infrastructure 

elsewhere in the world. For example, in the United Kingdom, utilities must 

develop asset management plans that identify the level of investment 

required to maintain and improve capital assets every 5 years; annual 

audits help ensure that planned improvements are made. Similarly, in 

2002, the legislature in Ontario, Canada enacted a law requiring 

municipalities to develop plans for recovering the full cost of service to 

ensure that drinking water and wastewater systems are adequately funded. 

Objectives, Scope, and 

Methodology

The Ranking Minority Member, Senate Committee on Environment and 

Public Works, asked us to examine the use of comprehensive asset 

management at drinking water and wastewater utilities in the United 

States. This report examines (1) the potential benefits of asset 

management for water utilities and the challenges that could hinder its 

implementation and (2) the role that the federal government might play in 

encouraging utilities to implement comprehensive asset management. 

To conduct our work, we reviewed relevant studies, handbooks, training 

materials, and other documents related to comprehensive asset 

management and its implementation, particularly for managing the 

infrastructure at drinking water and wastewater utilities. At the federal 

level, we obtained information from EPA’s Office of Ground Water and 

Drinking Water and Office of Wastewater Management, the offices that, 

along with the states, are responsible for overseeing drinking water and 

wastewater utilities. We also obtained information on other federal 

agencies with experience in asset management, predominantly the Federal 

Highway Administration in the U.S. Department of Transportation, and 

financial standards promulgated by the Governmental Accounting 

Standards Board. For site-specific information, our review included over 

14See International Infrastructure Management Manual, published jointly by the 

Association of Local Government Engineering New Zealand, Inc., and the Institute of Public 

Works Engineering of Australia (2002).
Chapter 1

Introduction

Page 23 GAO-04-461 Water Utility Asset Management

50 individual utilities from the United States, Australia, and New Zealand—

including 15 U.S. utilities at which we conducted structured interviews. 

Other sources of information included the following:

• state associations, including the Association of State Drinking Water 

Administrators and the Association of State and Interstate Water 

Pollution Control Administrators; 

• major industry groups, including the American Public Works 

Association, American Water Works Association, Association of 

Metropolitan Sewerage Agencies, Association of Metropolitan Water 

Agencies, National Association of Water Companies, National Rural 

Water Association, Water Environment Federation, and Water Services 

Association of Australia; 

• engineering and consulting firms with experience in helping utilities 

implement asset management, including Brown and Caldwell; CH2M 

Hill; Metcalf and Eddy, Inc.; Municipal and Financial Services Group; PA 

Consulting Group; and Parsons Corporation in the U.S.; GHD Pty. Ltd. in 

Australia; and Meritec in New Zealand; 

• several state and regional regulatory agencies in Australia and New 

Zealand; and

• EPA-funded state and university-based training and technical assistance 

centers.

To obtain information on the benefits and challenges of asset management, 

we conducted initial interviews with 46 domestic drinking water and 

wastewater utilities that knowledgeable government and water industry 

officials identified as implementing comprehensive asset management. To 

obtain more detailed information, we conducted structured interviews with 

officials from 15 of the 46 utilities. We selected the 15 utilities based on two 

criteria: (1) they reported or anticipated achieving quantitative benefits 

from asset management or (2) they represented smaller entities.15 (See 

15We were interested in learning about the applicability of asset management at small 

utilities because they represent the vast majority of the regulated systems, with 93 percent 

of community drinking water utilities and 71 percent of wastewater utilities serving 10,000 

people or fewer.
Chapter 1

Introduction

Page 24 GAO-04-461 Water Utility Asset Management

app. I for a list of the 15 utilities we selected for structured interviews.) In 

total, 12 of the 15 utilities were relatively large, serving populations ranging 

from 300,000 to 2,500,000; the remaining three were significantly smaller, 

serving populations ranging from 3,000 to 67,100. Because of the small 

number of utilities that we interviewed in depth and the way in which they 

were selected, our results are not generalizable to the larger universe of 

domestic drinking water and wastewater utilities.

Because of the utilities’ limited experience in implementing asset 

management, we supplemented the information obtained from domestic 

utilities with information from six utilities and five government agencies in 

Australia and New Zealand, two countries that have taken the lead in 

implementing comprehensive asset management. (See app. II for a list of 

the utilities and government agencies we contacted in Australia and New 

Zealand.) Outside the water industry, we consulted with the Private Sector 

Council, which identified two companies—The Gillette Company and SBC 

Communications, Inc.—with long-standing experience in using 

comprehensive asset management in their respective fields. We 

interviewed officials from these companies to obtain their perspectives on 

the benefits and challenges of implementing asset management. 

For information on the potential federal role in promoting asset 

management at water utilities, we obtained information from EPA’s Office 

of the Chief Financial Officer, Office of Ground Water and Drinking Water, 

and Office of Wastewater Management on the activities that EPA is 

currently sponsoring, including the development of informational materials 

on asset management; activities by EPA-funded, state and university-based 

training and technical assistance centers; and various studies and research 

projects. We also discussed options for a federal role in promoting asset 

management with officials from water industry associations, EPA, and the 

15 utilities selected for structured interviews. In addition, with the help of 

organizations and officials experienced in asset management, we identified 

the U.S. Department of Transportation as being at the forefront of federal 

involvement in this issue. We obtained and reviewed information about the 

department’s initiatives from the Office of Asset Management within the 

Federal Highway Administration. 

We conducted our work between March 2003 and March 2004 in 

accordance with generally accepted government auditing standards.
Chapter 1

Introduction

Page 25 GAO-04-461 Water Utility Asset Management

Comments from the 

Environmental 

Protection Agency

We provided a draft of this report to EPA for review and comment. We 

received comments from officials within EPA’s Office of Water and Office 

of the Chief Financial Officer, who generally agreed with the information 

presented in the report and our recommendations. They further noted that 

while EPA has played a major role in bringing asset management practices 

to the water industry, significant additional activity could be undertaken, 

and they have placed a high priority on initiating activities similar to those 

we suggested. The officials also made technical comments, which we 

incorporated as appropriate.
Page 26 GAO-04-461 Water Utility Asset Management

Chapter 2

Water Industry Officials Report Many Benefits 

from Asset Management Despite 

Implementation Challenges Chapte2r

While comprehensive asset management is relatively new to most drinking 

water and wastewater utilities in the United States, some utilities say they 

have already benefited from this approach and have also encountered 

certain challenges. The utilities reported benefiting from (1) improved 

decision making because they have better information about their capital 

assets and (2) improved relationships with governing authorities, 

ratepayers, and other stakeholders because they are better able to 

communicate information on infrastructure needs and improvement plans. 

While water industry officials identified benefits associated with 

comprehensive asset management, we found that reported savings should 

be viewed with caution.

Among the challenges of implementing asset management, utility officials 

cited the difficulty of (1) collecting the appropriate data and managing it 

efficiently and (2) making the cultural changes necessary to integrate 

information and decision making across departments. In addition, the 

officials reported that the short-term budget and election cycles typical of 

utility governing bodies make it difficult to meet the long-term capital 

investment planning needs of asset management. Although smaller utilities 

face more obstacles to implementing asset management than larger 

utilities, principally because of limited resources, they can also benefit 

from applying asset management concepts.

Utilities Cite Many 

Benefits from Asset 

Management and Some 

Cautions About 

Reported Savings

U.S. utilities expect to reap significant benefits from the data they collect, 

analyze, and share through an asset management approach. With these 

data, utilities expect to make more informed decisions on maintaining, 

rehabilitating, and replacing their assets, thereby making their operations 

more efficient. Utilities can also use these data to better communicate with 

their governing bodies and the public, which should help them to make a 

sound case when seeking rate increases. Although water industry officials 

identified financial and other benefits from using asset management, 

reported savings should be viewed with caution because, for instance, 

comprehensive asset management may be implemented concurrently with 

other changes in management practices or operational savings may be 

offset by increases in capital expenditures.
Chapter 2

Water Industry Officials Report Many 

Benefits from Asset Management Despite 

Implementation Challenges

Page 27 GAO-04-461 Water Utility Asset Management

Comprehensive Asset 

Management Can Improve 

Decisions about 

Maintaining, Rehabilitating, 

and Replacing Capital 

Assets

Collecting, sharing, and analyzing data through comprehensive asset 

management can help utilities to make more informed decisions about 

maintaining, rehabilitating, and replacing their assets. In particular, 

utilities can use the information collected and analyzed to prevent 

problems and allocate their maintenance resources more effectively. For 

example: 

• Better information enabled the Massachusetts Water Resources 

Authority to improve its maintenance decisions and eliminate some 

unneeded maintenance activities.1

 For example, in an effort to optimize 

maintenance practices in one of their treatment plants, utility officials 

reassessed maintenance practices for 12 equipment systems, such as 

different types of pumps. By using the assessment results to improve 

maintenance planning for these assets, the utility decreased the labor 

hours spent on preventive maintenance by 25 percent from the hours 

recommended by the original equipment manufacturers, according to 

utility officials. Similarly, in analyzing its maintenance practices, the 

Massachusetts Water Resources Authority found it was lubricating some 

equipment more often than necessary. By decreasing the frequency of 

oil changes, the utility reported it saved approximately $20,000 in oil 

purchase and disposal costs. In addition, the utility extended the life of 

its assets by decreasing the lubrication—over-lubrication can cause 

equipment parts to fail prematurely. 

• Seattle Public Utilities used asset management to better target its 

maintenance resources.2

 As part of the utility’s asset management 

strategy, officials used a risk management approach, calculating the 

likelihood and impact of a rupture for the utility’s sewer and drainage 

pipes. To determine the likelihood of rupture, officials considered such 

factors as a pipe’s age, material, and proximity to a historical landfill or 

steep slope. To determine the impact of a rupture, they examined 

factors such as a pipe’s size, location, and historical cost of repair. As a 

result of this analysis, utility officials identified 15 percent of their pipes 

as high risk, or “critical”—such as larger, older pipes located beneath 

downtown Seattle. They shifted resources to maintain and rehabilitate 

1

The Massachusetts Water Resources Authority provides water and sewer services to 

approximately 2.5 million people.

2

Seattle Public Utilities is a utility serving approximately 1.3 million drinking water 

customers and about 500,000 wastewater customers.
Chapter 2

Water Industry Officials Report Many 

Benefits from Asset Management Despite 

Implementation Challenges

Page 28 GAO-04-461 Water Utility Asset Management

these pipes. The officials considered the remaining 85 percent of pipes 

as noncritical, or, lower risk, because their failure was less likely or 

because a breakage would affect a limited number of customers, be 

repaired relatively quickly, and require minimal resources. For these 

pipes, the utility decided not to perform any preventive maintenance 

activities, only making repairs as needed. By taking this approach, 

utility officials believe they are using their staff resources more 

efficiently and that, over time, they will reduce their maintenance costs. 

Comprehensive asset management also helps managers to make more 

informed decisions about whether to rehabilitate or replace assets, and 

once they decide on replacement, to make better capital investment 

decisions. For example: 

• According to utility managers at the Louisville Water Company, the 

utility developed its Pipe Evaluation Model in the early 1990s as a tool 

for ranking its 3,300 miles of aging pipes and water mains for 

rehabilitation and replacement.3

 The pipe program includes many of the 

key principles and practices of comprehensive asset management: for 

instance, it integrated data about the age of the pipes with data about 

their maintenance history. In analyzing this information, managers 

discovered that two vintages of pipes—those built between 1862 and 

1865 and between 1926 and 1931—had the highest number of breaks per 

100 miles of pipeline. Consequently, they decided to replace the pipes 

from those two periods. The model also showed that pipes installed 

between 1866 and 1925 were fairly reliable, thus these pipes were 

targeted for rehabilitation rather than replacement. The utility is lining 

the interior of these pipes with cement, which is expected to extend 

their life by about 40 years. Furthermore, utility managers told us that 

their pipe model and other practices that use asset management 

principles have helped reduce the frequency of water main breaks from 

26 to 22.7 per hundred miles and the frequency of leaks from joints from 

8.2 to 5.6 per hundred miles.

• In implementing its asset management approach, managers at the 

Sacramento Regional County Sanitation District reassessed a proposed

3

 The Louisville Water Company provides water services to approximately 800,000 people in 

the Louisville, Kentucky, area and in parts of Oldham and Bullitt counties.
Chapter 2

Water Industry Officials Report Many 

Benefits from Asset Management Despite 

Implementation Challenges

Page 29 GAO-04-461 Water Utility Asset Management

investment in new wastewater treatment tanks and decided on a less 

expensive option, thereby saving the utility approximately $12 million.4

 

During this reassessment, managers found that increasing preventive 

maintenance on existing tanks would lower the risk of shutdown more 

cost-effectively than adding a new set of tanks. Utility officials 

commented that their implementation of asset management helped 

change their decision-making process by, among other things, bringing 

together staff from different departments to ensure more complete 

information, and more effectively using the data to understand 

investment options. 

• As a part of its asset management strategy, Seattle Public Utilities 

established an asset management committee, comprised of senior 

management from various departments, to ensure appropriate decision 

making about the utility’s capital improvement projects. For every 

capital improvement project with an expected cost over $250,000, 

project managers must submit a plan to the committee that (1) defines 

the problem to be solved, (2) examines project alternatives, 

(3) estimates the life-cycle costs of the alternatives, (4) analyzes the 

possible risks associated with the project, and (5) recommends an 

alternative. According to utility officials, implementing this process has 

led to deferring, eliminating, or altering several capital improvement 

projects, and contributing to a reduction in the utility’s 2004 capital 

improvement project budget for water of more than 8 percent. For 

instance, after drafting new water pressure standards, the utility 

eliminated the need for some new water mains. It developed an 

alternative plan to provide more localized solutions to increase water 

pressure, resulting in expected savings of $3 million. In another case, 

the utility reassessed alternatives to replacing a sewer line located on a 

deteriorating trestle, ultimately opting to restore and maintain the 

existing wood trestle and make spot repairs to the sewer line, which 

resulted in an estimated savings of $1.3 million. 

Finally, comprehensive asset management helps utilities share information 

across departments and coordinate planning and decision making. In this 

way, utility managers can reduce duplication of efforts and improve the 

allocation of staff time and other resources. For example, managers at 

Eastern Municipal Water District used asset management to improve their

4

The Sacramento Regional County Sanitation District is a California wastewater utility 

serving approximately 482,000 customers in the Sacramento area.
Chapter 2

Water Industry Officials Report Many 

Benefits from Asset Management Despite 

Implementation Challenges

Page 30 GAO-04-461 Water Utility Asset Management

business practices, which they saw as compartmentalized and inefficient.5 

In one instance, they examined their decentralized maintenance activities. 

The utility had two maintenance crews who worked throughout the 

system, in different shifts and reported to managers at four different 

facilities. In addition, the utility’s work order system was inefficient; for 

example, when different crew members independently reported the same 

maintenance need, managers did not notice the duplication because the 

problem was described in different terms (e.g., as a “breaker failure” by one 

crew member and as a “pump failure” by another). Finally, in some 

instances, work crews would arrive at a site only to find that needed 

maintenance work had already been completed. To improve the system, 

utility officials (1) centralized maintenance by making one person 

responsible for scrutinizing and setting priorities for all work orders and 

(2) established a standardized classification of assets, which helped 

maintenance staff use the same terminology when preparing work orders. 

Utility officials report that taking these steps allowed them to identify and 

eliminate work orders that were unnecessary, already completed, or 

duplicates, which ultimately reduced their maintenance work backlog by 

50 percent. 

The private sector companies we visited agreed that using a comprehensive 

asset management approach improved their decision making. Specifically, 

by improving their data, analyzing these data, and centralizing management 

decision making, managers at SBC Communications, Inc., reported that 

they have made better capital investment decisions and allocated resources 

more efficiently. Managers at The Gillette Company reported that they 

consider life-cycle costs and other factors to assess investment alternatives 

and, ultimately, make better investment decisions. 

Comprehensive Asset 

Management Can Help 

Utilities Justify Rate 

Increases and Proposed 

Projects to Their Customers 

and Governing Bodies

The utilities we contacted reported that comprehensive asset management 

also benefits their relations with external stakeholders by (1) making a 

sound case for rate increases to local governing bodies and ratepayers; 

(2) improving their bond rating with credit rating agencies, and (3) better 

demonstrating compliance with federal and state regulations. 

5

Eastern Municipal Water District is a water and wastewater utility serving approximately 

501,000 customers in Southern California.
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Making a Sound Case for Rate 

Increases

Some utilities have used, or expect to use, the information collected 

through comprehensive asset management to persuade elected officials to 

invest in drinking water and wastewater infrastructure through rate 

increases. For example, the Louisville Water Company reported that in the 

early 1990s it used the asset information it had gathered and analyzed to 

convince its local governing board that its current rates would not cover its 

expected costs and that the utility needed a rate increase to cover its 

anticipated rehabilitation and replacement needs. The board approved a 

set-aside of $600,000 for an infrastructure rehabilitation and replacement 

fund as a part of the requested rate increase in 1993, and, according to one 

utility official, has been supportive of including funds for asset 

rehabilitation and replacement as a part of rate requests since then. 

Furthermore, the utility manager requested that the amount of the set-aside 

gradually increase to $3 million over the next 5 years. According to this 

official, the board not only approved this request, it also increased the rates 

to support the fund sooner than the utility manager had requested. 

According to several other utilities that have begun to implement 

comprehensive asset management, this approach should enable them to 

justify needed rate increases from their governing bodies. Similarly, 

Australian and New Zealand officials we interviewed stated that the data 

from asset management helps utilities make a more credible case for rate 

increases from their governing bodies. 

Utility managers can also use the information they provide to their 

governing boards as a basis for evaluating and deciding on trade-offs 

between service levels and rates. For example, according to an official at 

South Australian Water Corporation, using asset management practices, he 

was able to suggest a range of funding alternatives to the utility’s governing 

body.

6

 The utility managers conducted statistical modeling on the asset 

information they collected (e.g., pipe performance history and financial 

information) and, using this analysis, predicted the approximate number of 

pipe breaks at various levels of funding. Understanding the trade-offs 

between lower rates and higher numbers of pipe breaks, the governing 

body could make an informed decision about what the appropriate level of 

service was for their community. 

6

The South Australian Water Corporation, an Australian utility located in the state of South 

Australia, provides water and wastewater services for approximately 1.4 million people.
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Improving the Bond Rating Comprehensive asset management also has the potential to improve a 

utility’s bond rating, a benefit that translates into savings through lower 

interest rates on loans and bonds. When deciding on a utility’s bond rating, 

credit rating agencies consider criteria related to comprehensive asset 

management, such as the utility’s management strategies and its planning 

for asset replacement. For example, according to a representative from 

one credit rating agency, asset management shows that a utility is 

considering future costs. He would therefore expect a utility with an asset 

management plan that looks at future capital and operating costs and 

revenues to receive a higher bond rating than a utility that does not 

sufficiently consider those future needs, even if that utility has a better 

economy and a higher tax base.

Some local officials believe that comprehensive asset management played 

a role in the bond ratings they received, or will do so in the future. For 

example, the finance director of the small northeastern city of Saco, Maine, 

told us that she believes that the city’s decision to use asset management 

practices—such as maintaining an up-to-date asset inventory, periodically 

assessing the condition of the assets, and estimating the funds necessary to 

maintain the assets at an acceptable level each year—contributed to the 

credit rating agencies’ decision to increase the city’s bond rating, which 

resulted in an expected savings of $2 million over a 20-year period.7

 

Similarly, a utility official at Louisville Water Company told us that asset 

management practices, such as strategically planning for the rehabilitation 

and replacement of its aging assets, helps the utility maintain its strong 

bond rating. 

7

Saco, Maine, is a city of approximately 16,800 people. Among other services, the city 

government is responsible for providing wastewater treatment. The city asked to have its 

bond rating reassessed before beginning a school renovation project. 
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Better Demonstrating 

Compliance with Federal and 

State Regulations

According to several utility managers we interviewed, comprehensive asset 

management can be used to help comply with regulations. For example:

• Comprehensive asset management practices played a role in improving 

their utility’s compliance with existing regulations. Specifically, among 

other things, asset management practices such as identifying and 

maintaining key assets led to fewer violations of pollutant discharge 

limitations under the Clean Water Act. At Western Carolina Regional 

Sewer Authority, for instance, the number of these violations decreased 

from 327 in 1998 (about the time that the utility began implementing 

asset management) to 32 violations in 2003.8

 

• At the Charleston Commissioners of Public Works,9 utility officials told 

us that if they had not had asset management in place it would be 

difficult to meet the rehabilitation program and maintenance program 

elements of EPA’s draft capacity, management, operation, and 

maintenance regulations for wastewater utilities.10 For instance, the 

draft regulations would require that wastewater utilities identify and 

implement rehabilitation actions to address structural deficiencies. 

Because the utility has implemented asset management practices, such 

as assessing the condition of its pipes and identifying those most in need 

of rehabilitation, it can better target its resources to rehabilitate pipes in 

the worst condition, and, in the process, meet the proposed standards 

for rehabilitation.

8

Western Carolina Regional Sewer Authority provides wastewater treatment services to 

approximately 360,000 customers in Greenville County, South Carolina, and portions of 

Spartanburg, Laurens, and Anderson counties.

9

The Charleston Commissioners of Public Works provides water and wastewater services to 

more than 400,000 customers in the Charleston, South Carolina, area.

10These regulations are under consideration. EPA proposed the regulations in January 2001, 

but in accordance with the incoming administration’s regulatory review plan, withdrew the 

proposal to give the administration an opportunity to review it.
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Although Water Industry 

Officials Identified Financial 

and Other Benefits from 

Asset Management, 

Reported Savings Should Be 

Viewed with Caution

Many of the U.S. utilities we interviewed were still in the early stages of 

implementing asset management and most had not measured financial 

savings. However, many water industry officials expect asset management 

to result in overall cost savings. Specifically, several officials told us they 

expect that asset management will slow the rate of growth of utilities’ 

capital, operations, and maintenance costs over the coming years. 

Nevertheless, total costs will rise because of the need to replace and 

rehabilitate aging infrastructure.

At least one U.S. utility has estimated the overall savings it will achieve 

using comprehensive asset management. Specifically, an engineering firm 

projected that asset management would reduce life-cycle costs for the 

Orange County Sanitation District by about $350 million over a 25-year 

period.11 Among other data, the engineering firm used the utility’s available 

operating expenditure information (operations, maintenance, 

administration, and depreciation data) and capital improvement program 

expenditures (growth/capacity, renewal/replacement, and level of support 

data) to model the projected life-cycle cost savings.

Additionally, some of the Australian utilities we interviewed reported 

financial savings. For example, officials at Hunter Water Corporation 

reported significant savings in real terms between fiscal years 1990 and 

2001: a 37 percent reduction in operating costs;12 improved service 

standards for customers, as measured by such factors as water quality and 

the number of sewer overflows; and a reduction of more than 30 percent in 

water rates for customers.13 Hunter Water officials believe that they 

achieved these efficiencies as a result of asset management. 

Though utility officials have made some attempts to quantify the impact of 

asset management, they also cited reasons for exercising caution in 

interpreting reported savings and other benefits. First, benefits such as 

operating cost reductions should not be considered in isolation of other 

utility costs. A utility cannot consider reductions in operating costs a net 

11The Orange County Sanitation District provides wastewater services for approximately 2.3 

million people living in central and northwest Orange County, California.

12The operating cost reductions were measured per property, or for each residential or 

community property connected to the water and sewer supply.

13Hunter Water Corporation is an Australian utility that provides water and wastewater 

services to almost 500,000 people in parts of New South Wales.
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benefit if, for instance, savings in operational costs are offset by an 

increase in the utility’s capital expenditures. Furthermore, reductions in 

operating costs may be caused by increases in capital expenditures 

because, for example, newer assets may require less maintenance and 

fewer repairs. In the case of the Hunter Water Corporation, the utility’s 

capital expenditures were at about the same level in 2001 as in 1991, 

despite some fluctuation over the period.14 

Second, other factors might have contributed to financial and other 

benefits. For example, a utility may be implementing other management 

initiatives concurrently with asset management and may not be able to 

distinguish the benefits of the various initiatives. In addition to using an 

asset management approach, for instance, some U.S. utilities we 

interviewed used an environmental management system, which shares 

some of the same components as asset management.15 Some of these 

utilities told us that they could not separate the benefits of asset 

management from those achieved as a result of their environmental 

management systems. 

In addition, reported savings from asset management can be misleading 

without complete information on how the savings estimates are derived. 

For example, a widely distributed graph shows an estimated 15 percent to 

40 percent savings in life-cycle costs for 15 wastewater utilities in Australia. 

EPA and others used the graph as a basis for projecting savings for U.S. 

utilities. However, the graph was mislabeled at some point—the reported 

reductions in life-cycle costs were actually reductions in operating costs.16

As we have already noted, operating costs reductions alone do not provide 

enough information to determine the net benefit of implementing asset 

management. 

14Hunter Water’s capital expenditures fluctuated during the 10-year period, decreasing from 

about $40 million in 1990/1991 to about $10 million in 1997/1998, then spiking to about 

$62 million in 2000/2001, then decreasing to about $40 million again. Utility officials 

attribute the spike in capital expenditures to growth and a regulatory upgrade of the utility’s 

wastewater treatment system and transport system.

15An environmental management system is a management tool to help an organization 

improve its environmental performance, prevent pollution, and meet regulatory 

requirements.

16EPA used these mislabeled Australian estimates as a basis for projecting life-cycle cost 

savings of 20 to 30 percent for U.S. utilities using asset management. Additionally, it appears 

that the engineering firm that predicted about $350 million in life-cycle cost savings for 

Orange County Sanitation District used the same estimates in its model. 
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Utilities Face 

Challenges in 

Successfully 

Implementing 

Comprehensive Asset 

Management

Despite the acknowledged benefits of comprehensive asset management, 

utilities face three key challenges that may make implementing this 

approach difficult. First, to determine the condition of current assets and 

the need for future investment, utilities have to gather and integrate 

complete and accurate data, which may require significant resources. 

Second, successful implementation requires cultural change—departments 

long accustomed to working independently must be willing to coordinate 

and share information. Finally, utilities may find that their efforts to focus 

on long-term planning conflict with the short-term priorities of their 

governing bodies. These three challenges may be more difficult for smaller 

utilities because they have fewer financial, staff, and technical resources.

Asset Management Requires 

Utilities to Collect Complete 

and Accurate Data 

The difficulties utilities experience gathering data to implement asset 

management depend on the (1) condition of their existing data, (2) ability 

to coordinate existing data across departments, (3) need to upgrade 

technology, and (4) ability to sustain complete and accurate data. One 

industry official noted that larger utilities, in particular, may have a more 

difficult time gathering and coordinating data because they typically 

possess a substantial number of assets. Nevertheless, utility officials and 

water association representatives agree that utilities should not allow these 

data challenges to prevent them from implementing asset management. 

These officials emphasized that utilities should begin implementing asset 

management by using the data they already possess, continuing data 

collection as they perform their routine repair and maintenance activities, 

or focusing data collection efforts on their most critical assets. 

Existing Data May Be 

Incomplete and Inaccurate

Domestic and international water officials emphasize the importance of 

obtaining, integrating, and sustaining good data for decision making. This 

is no small challenge. According to the Association of Metropolitan 

Sewerage Agencies and the International Infrastructure Management 

Manual, utilities generally need the following types of data to begin 

implementing asset management:

• age, condition, and location of the assets; 

• asset size and/or capacity;

• valuation data (e.g., original and replacement cost); 

• installation date and expected service life;
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• maintenance and performance history; and

• construction materials and recommended maintenance practices. 

According to utility officials and industry handbooks, utilities sometimes 

have incomplete or inaccurate historical data about their assets. For 

example:

• An official at the Augusta County Service Authority noted that the utility 

did not possess a great deal of detailed historical data about its assets.17 

For example, its asset ledger would indicate that “a pump station was 

installed at a particular location in 1967,” but would not provide any 

additional information about the assets, such as the individual 

components that make up this system. Similarly, the official told us that 

the utility’s prior billing system did not maintain historical data about its 

customers’ water usage rates. As a result, the management team found 

it difficult to adequately forecast their needed rate increases because 

they lacked historical information about water consumption.

• According to an East Bay Municipal Utility District official, the utility 

lacked detailed maintenance data on its assets before 1990 because 

maintenance workers had not consistently reported repairs to a central 

office.18

Given these problems, utility managers may have to invest a significant 

amount of time and resources to gather necessary data, particularly data 

about the condition of their thousands of miles of buried pipelines. 

Understandably, utilities are unwilling to dig up their pipelines to gather 

missing data. However, utilities may be able to derive some information 

about the condition of these pipes to the extent they have information on 

the pipes’ age, construction material, and maintenance history. In addition, 

utilities may choose to align their data collection with their ongoing 

maintenance and replacement activities. These approaches, however, may 

require new technology, which may mean a financial investment. For 

example:

17Augusta County Service Authority serves a population of approximately 67,000 people in 

Virginia.

18East Bay Municipal Utility District supplies water and provides wastewater treatment to 

approximately 1.3 million drinking water customers and 640,000 wastewater customers in 

parts of Alameda and Contra Costa counties in northern California.
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• Tacoma Water equipped its staff with laptop computers, which allows 

them to access their geographic information system—software that can 

track where assets are located—while they are in the field.19 As the staff 

perform their routine repair and rehabilitation activities, they can record 

and update data about an asset’s condition, performance, and 

maintenance history. 

• Similarly, the Department of Public Works in Billerica, Massachusetts, 

provided its field staff with handheld electronic devices programmed 

with a simple data collection template, which allows its staff to more 

accurately record information about its assets and their condition.20 

Consequently, the field staff can enter more accurate information about 

the utility’s assets into its central asset inventory. 

Utilities also reported difficulty collecting and applying information about 

the manufacturer’s recommended techniques for optimizing their 

maintenance practices for their assets. Since no central clearinghouse of 

information on optimal maintenance practices is readily available, these 

utilities have had to invest their own time and resources to develop this 

information. For example:

• According to an official at Des Moines Water Works, the utility 

discovered that the manufacturer’s recommended maintenance 

practices often conflicted with the utility’s experience with the same 

asset.21 This official pointed out that the manufacturer’s estimate for 

maintenance was always higher than the utility’s experience. Given 

these inconsistencies, the official noted, all utilities would benefit from 

the development of a central industry clearinghouse that provided 

information about the recommended maintenance practices for certain 

assets. 

• Similarly, an official at East Bay Municipal Utility District noted a 

significant difference between the manufacturer’s recommended 

19Tacoma Water serves approximately 300,000 customers in the city of Tacoma, Washington, 

and portions of Pierce and South King counties.

20The Department of Public Works in Billerica, Massachusetts, serves a population of 

approximately 10,000 people.

21Des Moines Water Works distributes water to a population of approximately 300,000 in Des 

Moines, Iowa, and its surrounding communities.
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maintenance practices and the utility’s experience with optimized 

maintenance. As a result, the utility has invested a significant amount of 

time in developing optimal maintenance practices for its assets and 

minimizing the risk of asset failure. 

While utilities need complete and accurate data for decision making, they 

also need to balance data collection with data management. Utilities may 

fall prey to data overload—collecting more data than they have the 

capacity to manage. For example, according to an official at the Augusta 

County Service Authority, while the utility has collected extensive 

infrastructure data, it has not invested enough of its resources into making 

these data useful for decision making. This official told us that utilities 

need to develop a data management strategy that identifies the types of 

data they need and the uses of these data for decision making. Without 

such a strategy, utilities gathering data will reach a point of diminishing 

returns. According to an official at the National Asset Management 

Steering Group in New Zealand, utilities should begin to implement asset 

management by identifying their critical assets and targeting their datagathering activities toward the critical information they need in order to 

make decisions about these assets. An official also recommended that 

utilities begin implementation by using their existing data—even though 

the data may not be completely accurate—and refine this information as 

they improve and standardize their data collection processes.

Coordinating Data Across 

Departments May Be Difficult

According to utility officials, coordinating data can be difficult because the 

data come from several different departments and from different sources 

within the departments. Furthermore, one industry handbook notes that a 

utility’s departments typically maintain different types of data about the 

same assets, which are formatted and categorized to meet each 

department’s individual needs and objectives.22 For example, the finance 

department may record an asset’s size in terms of square footage, while the 

engineering department may define an asset’s size in terms of pipeline 

diameter. Utilities adopting asset management need to coordinate these 

data to develop a central asset inventory. Table 2 shows the typical sources 

of data for a central inventory. 

22See Managing Public Infrastructure Assets to Minimize Cost and Maximize 

Performance, 57.
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Table 2: Typical Sources of Data for a Central Asset Inventory

Source: GAO. 

Note: Summary of material from two industry handbooks, Managing Public Infrastructure Assets to 

Minimize Cost and Maximize Performance and the International Infrastructure Management Manual.

Utility managers told us it was challenging to develop a standard data 

format for their central asset inventories. For example: 

• As previously noted, Eastern Municipal Water District’s work order 

system was inefficient because crew members from different facilities 

did not use the same terms in describing maintenance problems. To 

eliminate these inefficiencies, the utility invested a great deal of time 

and resources to standardize its terms and asset classification and 

implement a computerized maintenance management system.

• According to a Louisville Water Company official, improving and 

validating the utility’s data was a challenge. Over the years, the utility 

has acquired between 12 and 20 smaller utilities. Each of these smaller 

utilities maintained its own asset data, which were not always reliable or 

maintained in the same format. The utility invested a great deal of time 

to validate these data and coordinate them into its central asset 

inventory.

Department maintaining 

data Source of data

Types of data that may be 

available

Operations and 

Maintenance

Operations and 

maintenance manuals

Location, size, manufacturer, 

and materials of 

construction

Maintenance management 

system

Location, size, manufacturer, 

materials of construction, 

performance history, 

maintenance history, and 

original cost

Records of original asset 

drawings

Location, size, manufacturer, 

and materials of 

construction

Engineering Geographic information 

system

Location, size, and materials 

of construction

Records of original asset 

drawings

Location, size, manufacturer, 

and materials of 

construction

Finance Fixed asset inventory Size (e.g., square footage or 

acreage), installation date, 

and estimated value
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• Similarly, according to an official at the South Australian Water 

Corporation, developing a central asset inventory was particularly 

difficult because each of the utility’s departments used different terms 

to refer to the same asset. The utility refined its data collection 

practices by training its employees on how to record data in a standard 

format.

Utilities May Need to Upgrade 

Their Technology

The utility officials we spoke to also had to address problems in 

coordinating data maintained in different and incompatible software 

programs. A Water Environment Research Foundation survey of utility 

managers, regulators, and industry consultants cited developing an asset 

information management system that meets the needs of all users as the 

most difficult element of asset management to implement. Without an 

integrated information management system, utilities found it difficult to 

develop data for decision making, and they found that they had to invest 

time and money to enter these data into a central database. For example:

• According to a Greater Cincinnati Water Works official, the utility 

wanted to integrate information about its assets’ location and 

maintenance history to efficiently dispatch staff to repair sites.23 

However, the data for this report were stored in two separate and 

incompatible computer systems. To produce this information, the utility 

needed to re-enter the relevant data from each of these systems into a 

central asset database.

• Similarly, an official at Melbourne Water Corporation said that as his 

utility began to adopt asset management, it realized that it maintained 

relevant data in different computer systems, such as its computerized 

maintenance management system and its geographic information 

system.24 To address this fragmentation, the utility had to assign staff to 

consolidating its data into a central database to allow for easy 

integration.

As utilities coordinate their data systems, they may need to upgrade their 

existing technology, which can represent a significant financial investment. 

23Greater Cincinnati Water Works provides water to approximately 1.2 million customers. 

24Melbourne Water Corporation manages the city of Melbourne’s water catchments and 

major distribution system. The utility supplies approximately 500,000 megaliters of water 

annually to its three retail water companies.
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For example, Augusta County Service Authority has requested $100,000 to 

purchase data integration software, which would allow it to coordinate 

information from several different computer systems. However, as of 

September 2003, this request had not been approved, in part because the 

software may not directly affect the utility’s profits or improve its service, 

making the governing body reluctant to finance the purchase. Similarly, St. 

Paul Regional Water Services recognized that it would need to purchase a 

geographic information system as the basis for integrating all departments’ 

data.25 However, the official noted that the utility could not purchase this 

system for another 4 years because it would cost several million dollars to 

purchase the system, enter data, and train its staff to operate the new 

system.

Utilities Face Challenges in 

Maintaining Complete and 

Accurate Data

As utilities continue to obtain and integrate data, they still face the 

challenge of maintaining complete and accurate data about their assets. 

The International Infrastructure Management Manual notes that data 

collection is a continuous process and that utilities need to remain 

consistent in gathering data and updating their central asset inventory as 

they repair, replace, or add infrastructure. Regular updating ensures that 

the information remains useful over time. To sustain the benefits garnered 

from its efforts to compile an accurate inventory, the Eastern Municipal 

Water District adopted a policy whereby employees must document 

changes to the inventory whenever assets are added, repaired, or removed. 

The utility has also developed methods to enforce its policy to make sure 

that the inventory is updated as required.

Interdepartmental 

Coordination and 

Information Sharing Present 

Difficult Cultural Challenges 

According to industry officials, one of the major challenges to 

implementing asset management is changing the way utilities typically 

operate—in separate departments that do not regularly exchange 

information. It is essential to change this management culture, these 

officials believe, to encourage interdepartmental coordination and 

information sharing. 

To encourage interdepartmental communication, utilities may have to train 

their employees in using the resources of other departments. For example, 

at the Orange County Sanitation District, the management team found it 

25St. Paul Regional Water Services provides drinking water to approximately 415,000 

residents of St. Paul, Minnesota, and its surrounding communities.
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difficult to demonstrate to its employees that their job responsibilities do 

indeed affect the functions of the other departments. The utility’s field staff 

possesses extensive information about the condition and performance of 

assets because they maintain these assets every day. However, these 

employees did not understand that the engineering department needs 

feedback on how the assets that the engineering department constructed 

are performing in the field. Such feedback could change future designs for 

these assets to improve their performance. As the utility implemented asset 

management, it established a work group to examine the conditions of 

asset failure, which provided a forum for the maintenance and engineering 

departments to collaborate. While this work group is still ongoing, one 

utility official noted that collaboration between these two departments will 

result in more efficient maintenance schedules for the utility’s assets.

Similarly, the Eastern Municipal Water District reported that its middlemanagement team resisted some of the asset management changes 

because they believed these changes would limit their authority to manage 

their staff and workload. Before asset management, the utility maintained 

four different treatment facilities, each with its own maintenance staff. The 

utility believed that it could optimize its maintenance resources by 

combining all of the maintenance activities and staff at the four plants 

under one department. However, the managers at these treatment plants 

were reluctant to relinquish managerial control over their maintenance 

staff and feared that their equipment would be neglected. Once the new 

maintenance department was formed, however, these plant managers 

realized that centralizing these functions resulted in faster maintenance 

because the larger team could more effectively allocate time among the 

four facilities.

In some instances, utility employees may be reluctant to accept 

comprehensive asset management because it requires them to take on 

additional responsibilities when they are already pressed for time in their 

“day jobs.” Additional time may indeed be necessary. According to 

officials at different utilities we visited, asset management requires staff 

throughout the organization to attend a variety of training programs—

introductory, refresher, and targeted training by function or job—to ensure 

that they understand the value of asset management to both their own jobs 

and the operation of the utility.
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Utilities’ Efforts to Increase 

Focus on Long-Term 

Planning Conflict with 

Short-Term Priorities

While asset management provides utilities with information to justify 

needed rate increases, their justifications may not be effective because 

their governing body and their customers want to keep rates low. 

According to utility officials, governing bodies’ reluctance to increase rates 

may be linked to constituent pressure to hold down user rates. In 2002, we 

reported that 29 percent of drinking water and 41 percent of wastewater 

utilities serving populations over 10,000 did not cover their full cost of 

service through user rates in their most recent fiscal year. Furthermore, 

about half of these utilities did not regularly increase their user rates; 

rather, they raised their user rates infrequently—once, twice, or not at all—

from 1992 to 2001. 

Utility officials and water industry organizations also note that utilities may 

have to respond to governing bodies’ interests rather than to the long-term 

plan they developed using comprehensive asset management. For 

instance, while the Orange County Sanitation District’s governing board 

has supported comprehensive asset management, it overrode utility plans 

for some capital projects and instead funded a $500 million secondary 

sewage treatment plant, which was not a utility priority. The board took 

this action in response to public concerns that the operating sewage plant 

was inadequate and had contaminated the water. A subsequent report 

showed, however, that the contamination more than likely did not result 

from an inadequate treatment plant. However, the utility will probably 

have to defer other priorities in order to design and build this new facility. 

In addition, the governing body may shift funding originally budgeted to 

implement the next phase of Orange County’s asset management program 

to fund the new plant.

Several industry officials also pointed out that governing bodies for 

municipally owned utilities tend to make financial decisions about their 

drinking water and wastewater utilities in light of competing local needs 

that may be a higher priority for the electorate. One industry official also 

reported that locally elected officials tend to focus their efforts on shortterm, more visible projects, while utility managers must focus on sustaining 

the utility’s operation in the long term. For example, a utility’s governing 

body may decide to forgo infrastructure repairs in order to build a new 

school or baseball field. 
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Smaller Utilities Can Benefit 

from Asset Management 

Despite Challenges Posed 

by Limited Resources

Smaller utilities can also benefit from the improved data, coordination, and 

informed decision making that result from asset management. Although 

small utilities represent a substantial portion of the water and wastewater 

industry,26 officials recognize that these utilities may have more difficulty 

implementing asset management because they typically have fewer 

financial, technological, and staff resources. In addition, EPA has reported 

that small systems are less likely to cover their full cost of providing 

services because they have to spread their fixed infrastructure costs over a 

smaller customer base. However, EPA believes that comprehensive asset 

management will enable smaller systems to increase knowledge of their 

system, make more informed financial decisions, reduce emergency 

repairs, and set better priorities for rehabilitation and replacement. 

Even the most rudimentary aspects of asset management can produce 

immediate benefits for small communities. For example, the Somersworth, 

New Hampshire, Department of Public Works and Utilities avoided a 

ruptured sewer main because it had collected data through its asset 

management initiative that mapped the location of critical pipelines.27 As a 

result, when a resident applied for a construction permit to build a garage, 

the utility determined that one critical pipeline lay in the path of the 

proposed construction and could rupture. Therefore, the city of 

Somersworth denied the permit.

Similarly, the Department of Public Works in Denton, Maryland, which 

provides both drinking water and wastewater services, obtained positive 

results from applying asset management concepts without having to invest 

in sophisticated software or perform a complicated analysis. In this case, 

Denton’s city council was apprehensive about investing in new trucks for 

the utility even though some of the existing trucks were in poor condition. 

Council members believed that it would be less expensive to continue 

repairing the existing fleet. However, using data collected through their 

asset management initiative, utility managers were able to track the 

maintenance and depreciation costs associated with these vehicles. As a 

result, they could demonstrate to their governing body that it was more 

26As noted earlier, most U.S. utilities are small, with 93 percent of the 54,000 community 

drinking water systems and 71 percent of the 16,000 wastewater systems serving 10,000 

people or fewer.

27Somersworth is a New Hampshire city with approximately 11,000 residents. 

Somersworth’s Department of Public Works and Utilities is responsible for water and 

wastewater services for the city. 
Chapter 2

Water Industry Officials Report Many 

Benefits from Asset Management Despite 

Implementation Challenges

Page 46 GAO-04-461 Water Utility Asset Management

cost-effective to purchase new vehicles than to continue repairing the older 

trucks.

Because smaller utilities have fewer capital assets to manage, industry 

officials noted that these utilities can implement asset management by 

turning to low-cost alternatives that do not require expensive or 

sophisticated technology. The small utilities can implement asset 

management using their existing asset data and recording this information 

in a central location that can be accessed by all of its employees, such as a 

set of index cards or an Excel spreadsheet. Similarly, the utility can adopt 

the practices of asset management incrementally, by initially making asset 

decisions based on their existing data. 
Page 47 GAO-04-461 Water Utility Asset Management

Chapter 3

EPA Can Encourage Water Utilities to Use 

Asset Management by Strengthening Existing 

Initiatives Chapte3r

Opportunities exist for EPA to encourage water utilities’ use of asset 

management by strengthening existing initiatives. Currently, EPA sponsors 

several initiatives to promote the use of asset management, such as training 

and informational materials, technical assistance, and research. While this 

is a good first step, the entities involved in these initiatives are not 

systematically sharing information within and across the drinking water 

and wastewater programs. With better coordination, however, EPA could 

leverage limited resources and reduce the potential for duplication within 

the agency. EPA could supplement its own efforts to disseminate 

information on asset management by taking advantage of similar efforts by 

other federal agencies, such as the Department of Transportation. Water 

industry officials also see a role for EPA in educating utility managers 

about how asset management can be a tool to help them meet regulatory 

requirements related to utility management. However, the officials raised 

concerns about the implications of mandating asset management as 

proposed in legislation being considered by the Congress. 

EPA Sponsors Several 

Initiatives to Promote 

Utilities’ Use of Asset 

Management

Through partnerships with water industry associations and universities, 

EPA has supported the development of training and informational 

materials to help drinking water and wastewater utilities implement asset 

management. In particular, EPA contributed funding toward the 

development of a comprehensive industry handbook on asset management, 

which was published in 2002 under a cooperative agreement with the 

Association of Metropolitan Sewerage Agencies.1

 The handbook lays out 

the principles of asset management and describes how utilities can use this 

approach to improve decision making, reduce costs, and ensure the longterm, high-level performance of their assets. 

EPA has also sponsored materials specifically directed at small utilities. 

For small drinking water systems, EPA’s Office of Ground Water and 

Drinking Water published a handbook in 2003 that describes the basic 

concepts of asset management and provides information on how to 

develop an asset management plan.2

 In addition, to help entities such as 

1

The Association of Metropolitan Sewerage Agencies developed the handbook, Managing 

Public Infrastructure Assets to Minimize Cost and Maximize Performance, in partnership

with the American Water Works Association, the Association of Metropolitan Water 

Agencies, and the Water Environment Federation.

2

U.S. Environmental Protection Agency, Asset Management: A Handbook for Small Water 

Systems, EPA 816-R-03-016 (Washington, D.C.: September 2003).
Chapter 3

EPA Can Encourage Water Utilities to Use 

Asset Management by Strengthening 

Existing Initiatives

Page 48 GAO-04-461 Water Utility Asset Management

mobile home parks and homeowners’ associations that own and operate 

their own water systems, the office is developing a booklet on preparing a 

simple inventory of the systems’ assets and assessing their condition.3

 

EPA’s Office of Wastewater Management is funding the development of a 

“toolkit” by a university-based training center to help small wastewater 

utilities implement asset management. The toolkit is currently being field 

tested and is scheduled for release in 2006. Among other things, it includes 

self-audit instruments to help utility managers to analyze their systems’ 

needs, training materials, and a summary of lessons learned in the field. 

In addition to various informational materials on asset management, EPA 

has sponsored a number of training and technical assistance programs. 

For example, the Office of Wastewater Management, along with 

representatives from a major utility and an engineering firm, developed a 

2-day seminar on asset management, which will be held at several locations 

around the country during fiscal year 2004. For smaller drinking water and 

wastewater utilities, EPA funds state and university-based centers that 

provide training and technical assistance to small utilities on a variety of 

matters, including asset management. Specifically

• EPA’s Office of the Chief Financial Officer funds nine university-based 

“environmental finance centers” that assist local communities in 

seeking financing for environmental facilities, including municipal 

drinking water and wastewater utilities. In fiscal year 2003, the nine 

centers shared a total of $2 million in funding from the Office of the 

Chief Financial Officer; some centers also receive funds from EPA 

program offices for specific projects. According to an official in EPA’s 

Office of Ground Water and Drinking Water, at least three of the finance 

centers have efforts related to asset management planned or underway 

to benefit drinking water utilities. For example, the centers at Boise 

State University and the University of Maryland provide on-site and 

classroom training on establishing an asset inventory; collecting data on 

the age, useful life, and value of capital assets; recordkeeping; financing; 

and setting rates high enough to cover the full cost of service. 

Regarding the latter topic, Boise State’s finance center developed a 

simplified software program, called CAPFinance, which can help 

smaller systems collect and analyze the data they need in order to set 

3

EPA has drafted the booklet, Taking Stock of Your Water System, and expects to publish 

the final version sometime in 2004.
Chapter 3

EPA Can Encourage Water Utilities to Use 

Asset Management by Strengthening 

Existing Initiatives

Page 49 GAO-04-461 Water Utility Asset Management

adequate user rates; much of this information can be used to create a 

rudimentary asset management program. 

• Another eight university-based technical assistance centers receive 

funding under the Safe Drinking Water Act to help ensure that small 

drinking water systems have the capacity they need to meet regulatory 

requirements and provide safe drinking water. In fiscal year 2003, the 

eight centers shared about $3.6 million in funding from the Office of 

Ground Water and Drinking Water. According to an official from that 

office, three of the centers are holding workshops or developing 

guidance manuals that focus on sustaining the financial viability of small 

systems in some way; the official believes that much of this material is 

relevant to implementing asset management.

• The Office of Wastewater Management funds 46 state and universitybased environmental training centers under the Clean Water Act to train 

wastewater utility officials on financial management, operations and 

maintenance, and other topics. According to an official with EPA’s 

wastewater program, one of the 46 centers is developing a series of six 

training courses to help small wastewater utilities implement some of 

the basic elements of asset management, such as inventorying system 

assets and assessing their condition.4

 Once this effort is completed, the 

center will disseminate the course materials to the remaining 45 centers 

so that staff from the other centers will be able to teach the asset 

management courses to operators of small wastewater utilities across 

the country.

EPA has also funded research projects related to asset management. For 

example, one project—sponsored by EPA, the Water Environment 

Federation, and the Association of Metropolitan Sewerage Agencies—

examined the interrelationship between asset management and other 

management initiatives, such as environmental management systems, that 

have received some attention within the water industry.5

 The project found 

4

The training courses are being developed by the environmental training center located at 

the College of Southern Maryland, which is also responsible for the asset management 

toolkit for small wastewater utilities. To fund this work, EPA awarded the center a 3-year 

grant totaling $450,000, covering the period from August 2002 to August 2005.

5

An environmental management system is a management tool to help an organization 

improve its environmental performance, prevent pollution, and meet regulatory 

requirements. 
Chapter 3

EPA Can Encourage Water Utilities to Use 

Asset Management by Strengthening 

Existing Initiatives

Page 50 GAO-04-461 Water Utility Asset Management

that to varying degrees, the initiatives share a common focus on continuous 

improvement through self-assessment, benchmarking, and the use of best 

practices and performance measures. The final report, issued in 

September 2002, concluded that while the initiatives overlap substantially, 

they are generally compatible.6

 

EPA also contributed $75,000 toward a 2002 report by the Water 

Environment Research Foundation, which summarized the results of a 

2-day workshop held to develop a research agenda for asset management.7 

Workshop participants, who included utility managers, regulators, and 

industry consultants, identified areas in which they need improved tools 

and technical approaches, established criteria for evaluating asset 

management research needs, and identified and set priorities for specific 

research projects. According to the foundation’s report, the workshop 

ultimately recommended 11 research projects, 2 of which will get 

underway in 2004. EPA is contributing $200,000 to one of these projects, 

which will develop protocols for assessing the condition and performance 

of infrastructure assets and predictive models for correlating the two. The 

foundation will fund the second project, which is scheduled to begin in 

March 2004, and will develop guidance on strategic planning for asset 

management. According to EPA, the second project will also develop a 

Web-based collection of best practices on asset management; utilities will 

be able to purchase licenses to gain access to the materials. 

The remaining research projects identified in the workshop highlight the 

need for practical tools to help utilities implement the most fundamental 

aspects of asset management. They include projects to 

• establish methodologies for determining asset value, compiling 

inventories, and capturing and compiling information on the assets’ 

attributes;

6

Water Environment Federation and Association of Metropolitan Sewerage Agencies, 

Moving Toward Comprehensive Utility Management Systems: Report of the 

Environmental Management Systems (EMS) for Public Utilities Integration Project

(Alexandria, Va.; Washington, D.C.: September 2002). EPA provided a grant of $256,888 for 

this project. 

7

See Water Environment Research Foundation, Research Priorities for Successful Asset 

Management: A Workshop (Alexandria, Va.: 2002). 
Chapter 3

EPA Can Encourage Water Utilities to Use 

Asset Management by Strengthening 

Existing Initiatives

Page 51 GAO-04-461 Water Utility Asset Management

• develop methodologies for calculating life-cycle costs for infrastructure 

assets; 

• construct predictive models for infrastructure assets that project lifecycle costs and risks;

• identify best practices for operating and maintaining infrastructure 

assets by asset category, condition, and performance requirements; and 

• identify best practices for integrating water and wastewater utility 

databases.

In addition, workshop participants recommended a project to assess the 

feasibility of establishing an Asset Management Standards Board for the 

drinking water and wastewater industry.

EPA’s Efforts to 

Promote Asset 

Management Could Be 

Strengthened by 

Leveraging Ongoing 

Efforts Within and 

Outside the Agency

EPA could build on its efforts to promote asset management at drinking 

water and wastewater utilities by better coordinating ongoing and planned 

initiatives in the agency’s drinking water and wastewater programs. In 

addition, EPA could leverage the efforts of other federal agencies, such as 

the Department of Transportation, that have more experience in promoting 

asset management as well as informational materials and tools that could 

potentially be useful as EPA and the water industry develop similar 

materials.

Improving Coordination 

Within and Across Drinking 

Water and Wastewater 

Programs Could Help 

Maximize Limited 

Resources

While some of EPA’s efforts to promote the use of asset management, such 

as sponsoring the comprehensive industry handbook, have involved both 

the drinking water and wastewater communities, it appears that other 

efforts are occurring with little coordination between the drinking water 

and wastewater programs or other offices within EPA. For example, the 

Office of the Chief Financial Officer, the Office of Ground Water and 

Drinking Water, and the Office of Wastewater Management have funded 

parallel but separate efforts to develop handbooks, software, or other 

training materials to help small drinking water and wastewater utilities 

implement asset management or related activities such as improving 

financial viability. According to our interviews with EPA officials and 

representatives of the university-based training and technical assistance 

centers, no central repository exists for EPA to track what the university-
Chapter 3

EPA Can Encourage Water Utilities to Use 

Asset Management by Strengthening 

Existing Initiatives

Page 52 GAO-04-461 Water Utility Asset Management

based centers are doing and ensure that they have the information they 

need to avoid duplication and take advantage of related work done by 

others. The centers that share information do so primarily within their own 

network, as in the case of the environmental finance centers, or share 

information on an ad hoc basis. As a result, the centers are likely to miss 

some opportunities to exchange information. Similarly, the drinking water 

and wastewater program offices do not regularly exchange information on 

what they or their centers are doing to develop informational materials, 

training, or technical assistance on asset management.

EPA officials explained that, to some extent, the organizational framework 

within which the centers operate contributes to limited information sharing 

and duplication of effort. As a result, EPA is not maximizing the resources 

it devotes to encouraging utilities’ use of asset management. In the case of 

the environmental finance centers, for example, each one negotiates a 

work plan with the EPA regional office it serves. Although EPA 

headquarters also has some influence over what the centers work on, the 

centers primarily focus on regional priorities and work with the states 

within the regional office’s jurisdiction. Occasionally, EPA’s drinking water 

and wastewater program offices fund projects at the environmental finance 

centers that are independent of their regional work plans. For example, the 

drinking water program provided some funds to the center at Boise State to 

develop an evaluation tool that states can use to assess utilities’ 

qualifications for obtaining financial assistance from state revolving loan 

funds. For the most part, however, the training and technical assistance 

centers operate autonomously and do not have a formal mechanism for 

regularly exchanging information among the different center networks or 

between the drinking water and wastewater programs.

EPA Could Supplement Its 

Efforts to Promote Asset 

Management by Using 

Information Available from 

Other Federal Agencies

EPA has not taken advantage of the guidance, training, and implementation 

tools available from other federal agencies, which would help EPA leverage 

its resources. For the purposes of our review, we focused on the 

Department of Transportation’s Federal Highway Administration because it 

has been involved in promoting asset management for about a decade and 

has been at the forefront of developing useful tools and training materials. 

In 1999, the Federal Highway Administration established an Office of Asset 

Management to develop tools and other materials on asset management 

and encourage state transportation agencies to adopt asset management 

programs and practices.
Chapter 3

EPA Can Encourage Water Utilities to Use 

Asset Management by Strengthening 

Existing Initiatives

Page 53 GAO-04-461 Water Utility Asset Management

According to officials within the Office of Asset Management, the basic 

elements of asset management are the same regardless of the type of entity 

responsible for managing the assets or the type of assets being managed. 

Simply put, every organization needs to know the assets it has, their 

condition, how they are performing, and the costs and benefits of 

alternatives for managing the assets. Over the years, the Office of Asset 

Management has published several guidance documents on asset 

management and its basic elements. While the purpose of the guidance 

was to assist state transportation agencies, Transportation officials believe 

that the general principles contained in their publications are universally 

applicable. The office’s guidance includes, for example,

• a general primer on the fundamental concepts of asset management; 

• a primer on data integration that lays out the benefits of and tools for 

integrating data, the steps to follow in linking or combining large data 

files, potential obstacles to data integration and ways to overcome them, 

and experiences of agencies that have integrated their data;8

 and 

• a primer on life-cycle cost analysis that provides information on how to 

apply this methodology for comparing investment alternatives and 

describes uncertainties regarding when and how to use life-cycle cost 

analysis and what assumptions should be made during the course of the 

analysis.9

 

Transportation’s Office of Asset Management has also developed a 

software program to assist states in estimating how different levels of 

investment in highway maintenance will affect both user costs and the 

highways’ future condition and performance. In addition, to disseminate 

information on asset management, the office established a Web site that 

includes its most recent tools and guidance and links to external Web sites 

with related asset management information, including a link to an asset 

management Web site jointly sponsored with the American Association of 

State Highway and Transportation Officials.

8

U.S. Department of Transportation, Federal Highway Administration, Office of Asset 

Management, Data Integration Primer (Washington, D.C.: August 2001).

9

U.S. Department of Transportation, Federal Highway Administration, Office of Asset 

Management, Life-Cycle Cost Analysis Primer (Washington, D.C.: August 2002).
Chapter 3

EPA Can Encourage Water Utilities to Use 

Asset Management by Strengthening 

Existing Initiatives

Page 54 GAO-04-461 Water Utility Asset Management

As EPA began its efforts to explore the potential of comprehensive asset 

management to help address utility infrastructure needs, officials from the 

Office of Water met with staff from Transportation’s Office of Asset 

Management and obtained a detailed briefing on its asset management 

program. Although EPA officials expressed concerns about having 

relatively limited resources to promote asset management, they have so far 

not pursued a closer relationship with Transportation or other federal 

agencies with experience in the field. For example, EPA may find 

opportunities to adapt Transportation’s guidance materials or use other 

efforts, such as a Web site that brings together asset management 

information from diverse sources, as a model for its own initiatives.

Water Industry 

Officials Favor an 

Expanded Role for 

EPA in Promoting 

Asset Management, but 

Raised Concerns About 

Additional Regulatory 

Requirements

Water industry officials support a greater role for EPA in promoting asset 

management, both as a tool for better managing infrastructure and for 

helping drinking water and wastewater utilities meet existing or proposed 

regulatory requirements. However, they stopped short of endorsing 

legislative proposals that would require utilities to develop and implement 

plans for maintaining, rehabilitating, and replacing capital assets, often as a 

condition of obtaining loans or other financial assistance. 

Water Industry Officials See 

Role for EPA in Linking 

Asset Management to 

Regulatory Requirements 

and Other Initiatives Aimed 

at Improving Utility 

Management

To obtain views on the role that EPA might play in encouraging the use of 

asset management, we talked with officials from water industry 

associations and the 15 utilities that we selected for structured interviews. 

With few exceptions, the officials agreed that EPA should be promoting 

asset management in some way, although opinions varied on what activities 

would be most appropriate. One of the options that garnered the support 

of many was a greater leadership role for EPA in promoting the use of asset 

management. For example, 11 of the 15 utilities indicated that based on 

their own experience, asset management can help utilities comply with 

certain regulatory requirements that focus in whole or in part on the 

adequacy of utility infrastructure and the management practices that affect 

it. While EPA recognizes the link between asset management and 

regulatory compliance—and has noted the connection in some agency 

publications and training—some utility officials believe that EPA should 

increase its efforts in this regard. As examples of regulatory requirements 
Chapter 3

EPA Can Encourage Water Utilities to Use 

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Existing Initiatives

Page 55 GAO-04-461 Water Utility Asset Management

for which asset management is particularly germane, officials from 

industry associations and individual utilities cited both the existing 

“capacity development” requirements under EPA’s drinking water program 

and regulations for capacity, management, operation, and maintenance 

under consideration in the wastewater program, as follows:

• Capacity development requirements for drinking water utilities. To 

be eligible for full funding under the Safe Drinking Water Act’s State 

Revolving Fund program, state regulatory agencies are required to have 

strategies to assist drinking water utilities in acquiring and maintaining 

the financial, managerial, and technical capacity to consistently provide 

safe drinking water. To assess capacity, states evaluate, among other 

things, the condition of the utilities’ infrastructure, the adequacy of 

maintenance and capital improvement programs, and the adequacy of 

revenues from user rates to cover the full cost of service. Drinking 

water utilities that are determined to lack capacity are not eligible for 

financial assistance from the revolving loan fund.10 

• Capacity, management, operation, and maintenance requirements for 

wastewater utilities. As part of its wastewater management program 

under the Clean Water Act, EPA is considering regulations designed to 

improve the performance of treatment facilities and protect the nation's 

collection system infrastructure by enhancing and maintaining system 

capacity (i.e., peak wastewater flows), reducing equipment and 

operational failures, and extending the life of sewage treatment 

equipment. Among other things, wastewater utilities would be required 

to prepare capacity, management, operation, and maintenance plans for 

their operations. The regulations would also require utilities to assess 

the condition of their physical infrastructure and determine which 

components need to be repaired or replaced. 

According to industry officials, implementing asset management is 

consistent with meeting these requirements, and it enhances utilities’ 

ability to comply with them. For the requirements being considered for 

wastewater utilities, for example, EPA has concluded that three basic 

components are a facility inventory, a condition assessment, and asset 

10States may nevertheless provide financial assistance if the use of such assistance will 

ensure compliance with regulatory requirements and the water utility has agreed to make 

the necessary changes in operations to ensure that it has the financial, managerial, and 

technical capacity to comply over the long term.
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Existing Initiatives

Page 56 GAO-04-461 Water Utility Asset Management

valuation—all of which are important elements of asset management. 

Consequently, the officials believe that it makes sense for EPA to place 

more emphasis on the use of comprehensive asset management.

Some water industry officials also told us that EPA should use the 

relationship between asset management practices and the financial 

reporting requirements under Governmental Accounting Standards Board 

Statement 34 as a means of promoting the use of asset management. Under 

these new requirements, state and local governments are required to report 

information about public infrastructure assets, including their drinking 

water and wastewater facilities. Specifically, the governments must either 

report depreciation of their capital assets or implement an asset 

management system.11 

Given the infrastructure-related regulatory requirements and utilities’ other 

concerns about the condition of their assets, it is not surprising that 11 of 

the 15 utilities we interviewed in depth saw a need for EPA to set up a 

clearinghouse of information on comprehensive asset management. 

Several utilities suggested that EPA establish a Web site that would serve as 

a central repository of such information. This site could provide drinking 

water and wastewater utilities with direct and easy access to information 

that would help them better manage their infrastructure. For example, the 

Web site could gather in one place the guidance manuals, tools, and 

training materials developed by EPA or funded through research grants and 

its training and technical assistance centers. The site could also contain 

links to asset management tools and guidance developed by domestic and 

international water associations or other federal agencies, such as 

Transportation’s Office of Asset Management. Several officials also 

commented that it might be useful to have a site where drinking water and 

wastewater utilities could share lessons learned from implementing asset 

management. Other utilities also supported the idea of a Web site, but were 

uncertain about whether EPA was the appropriate place for it. In 

commenting on a draft of this report, EPA generally agreed that an EPA 

Web site devoted to asset management would be worthwhile and is 

considering developing such a site. 

11Privately owned utilities are not required to comply with financial reporting requirements 

from the Governmental Accounting Standards Board. About half of the nation’s drinking 

water systems and an estimated 20 percent of the wastewater systems are privately owned, 

according to EPA and industry sources.
Chapter 3

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Asset Management by Strengthening 

Existing Initiatives

Page 57 GAO-04-461 Water Utility Asset Management

Water Industry Officials Cite 

Implementation Challenges 

if Asset Management Were 

to Be Mandated

In recent years, the Congress has considered several legislative proposals 

that would, in part, promote the use of asset management in some way. 

These proposals generally call for an inventory of existing capital assets; 

some type of plan for maintaining, repairing, and replacing the assets; and a 

plan for funding such activities. All but one of the proposals made having 

the plans a condition of obtaining federal financial assistance. The 

proposals are consistent with what we have found to be the leading 

practices in capital decision making. As we reported in 1998, for example, 

routinely assessing the condition of assets allows managers to evaluate the 

capabilities of existing assets, plan for future replacements, and calculate 

the cost of deferred maintenance.12 However, according to key 

stakeholders, implementing and enforcing requirements for asset 

management could be problematic at this time.

We asked water industry groups, associations of state regulators, and 

individual utilities for their views on the proposed mandate of asset 

management plans. While most of them endorse asset management, they 

raised several concerns about a statutory requirement. For example:

• Officials from water industry associations believe that drinking water 

and wastewater utilities are already overburdened by existing 

regulatory requirements and that many utilities lack the resources to 

meet an additional requirement for developing asset management plans.

• The Association of State Drinking Water Administrators and the 

Association of State and Interstate Water Pollution Control 

Administrators both said that the states lack the resources to oversee 

compliance and determine the adequacy of asset management plans. 

Both the state and industry associations questioned the feasibility of 

defining what would constitute an adequate plan.

• Officials at 12 of the 15 utilities where we conducted in-depth interviews 

had serious reservations about a requirement. For example, some utility 

managers were concerned that EPA and the states would attempt to 

standardize asset management and limit the flexibility that utilities need 

to tailor asset management to their own circumstances. Another 

concern was that the states lack financial and technical resources and 

thus are ill equipped to determine whether utilities’ asset management 

12GAO/AIMD-99-32, 26.
Chapter 3

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Existing Initiatives

Page 58 GAO-04-461 Water Utility Asset Management

plans are adequate. Finally, some utility officials also questioned the 

burden that such a requirement would place on small utilities. 

Other utility officials either support a requirement or support the concept 

of asset management but question whether mandating such a requirement 

is an appropriate role for the federal government. One of the officials 

commented that whether or not asset management is required, utilities 

should manage their infrastructure responsibly and charge rates sufficient 

to cover the full cost of service. The National Association of Water 

Companies, which represents investor-owned utilities, supports a 

requirement for asset management to ensure that public water and 

wastewater utilities are operating efficiently and are charging rates that 

cover the full cost of service. 

Conclusions Comprehensive asset management shows real promise as a tool to help 

drinking water and wastewater utilities better identify and manage their 

infrastructure needs. Even with their limited experience to date, water 

utilities reported that they are already achieving significant benefits from 

asset management. EPA clearly recognizes the potential of this 

management tool to help ensure a sustainable water infrastructure and has 

sponsored a number of initiatives to support the development of 

informational materials and encourage the use of asset management. 

However, in an era of limited resources, it is particularly important for EPA 

to get the most out of its investments by coordinating all of the asset 

management-related activities sponsored by the agency and taking 

advantage of tools and training materials developed by others—including 

domestic and international industry associations and other federal 

agencies with experience in asset management. 

Establishing a central repository of all asset management-related activities 

could not only foster more systematic information sharing but also help 

minimize the potential for duplication and allow EPA-sponsored training 

and technical assistance centers to build on each other’s efforts. As EPA 

has recognized, improving utilities’ ability to manage their infrastructure 

cannot help but improve their ability to meet regulatory requirements that 

focus on the adequacy of utility infrastructure and management practices. 

Consequently, it is in the agency’s best interest to disseminate information 

on asset management and promote its use. Establishing a Web site, 

perhaps as part of the repository, would help ensure that such information 

is accessible to water utilities and that EPA is getting the most use out of 

the materials whose development it funded. Moreover, EPA could use the 
Chapter 3

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Existing Initiatives

Page 59 GAO-04-461 Water Utility Asset Management

site as a means of strengthening its efforts to educate utility managers on 

the connection between effectively managing capital assets and the ability 

to comply with relevant requirements under the Safe Drinking Water Act 

and Clean Water Act.

Recommendations for 

Executive Action

Given the potential of comprehensive asset management to help water 

utilities better identify and manage their infrastructure needs, the 

Administrator, EPA, should take steps to strengthen the agency’s existing 

initiatives on asset management and ensure that relevant information is 

accessible to those who need it. Specifically, the Administrator should

• better coordinate ongoing and planned initiatives to promote 

comprehensive asset management within and across the drinking water 

and wastewater programs to leverage limited resources and reduce the 

potential for duplication; 

• explore opportunities to take advantage of asset management tools and 

informational materials developed by other federal agencies;

• strengthen efforts to educate utilities on how implementing asset 

management can help them comply with certain regulatory 

requirements that focus in whole or in part on the adequacy of utility 

infrastructure and the management practices that affect it; and 

• establish a Web site to provide a central repository of information on 

comprehensive asset management so that drinking water and 

wastewater utilities have direct and easy access to information that will 

help them better manage their infrastructure.
Page 60 GAO-04-461 Water Utility Asset Management

Appendix I

Utilities Selected for Structured Interviews ApApenednxidexiIs

Augusta County Service Authority, Verona, Virginia

Charleston Commissioners of Public Works, Charleston, South Carolina

Greater Cincinnati Water Works, Cincinnati, Ohio

Denton Department of Public Works, Denton, Maryland

Des Moines Water Works, Des Moines, Iowa

East Bay Municipal Utility District, Oakland, California

Eastern Municipal Water District, Perris, California

Louisville Water Company, Louisville, Kentucky

Massachusetts Water Resources Authority, Boston, Massachusetts

Orange County Sanitation District, Fountain Valley, California

Sacramento Regional County Sanitation District, Mather, California

Seattle Public Utilities, Seattle, Washington

Somersworth Department of Public Works and Utilities, Somersworth, 

New Hampshire

Tacoma Water, Tacoma, Washington

Western Carolina Regional Sewer Authority, Greenville, South Carolina
Page 61 GAO-04-461 Water Utility Asset Management

Appendix II

GAO Contacts in Australia and New Zealand ApendxiI

Government agency State or region Country

Department of Treasury and Finance Victoria Australia

Essential Services Commission Victoria Australia

Independent Pricing and Regulatory Tribunal New South Wales Australia

Manawatu District Council Manawatu-Wanganui New Zealand

Queensland Audit Office Queensland Australia

Utility State or region Country

Citiwater Queensland Australia

Hunter Water Corporation New South Wales Australia

Melbourne Water Corporation Victoria Australia

South Australian Water Corporation South Australia Australia

Sydney Water Corporation New South Wales Australia

Watercare Services Limited Auckland New Zealand
Page 62 GAO-04-461 Water Utility Asset Management

Appendix III

GAO Contacts and Staff Acknowledgments ApendxiI

GAO Contacts Ellen Crocker, (617) 788-0580

Maureen Driscoll, (617) 788-0540

Staff 

Acknowledgments

In addition to the individuals named above, Ramona Burton, Cory 

Claussen, Robert Crystal, Teresa Dee, Janet McKelvey, Melissa Mink, Lynn 

Musser, Mehrzad Nadji, and Carol Herrnstadt Shulman made key 

contributions to this report. 

(360305)
GAO’s Mission The General Accounting Office, the audit, evaluation and investigative arm of 

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