Rural Water - Quarter 3, 2018 - 21

FINANCE

Building Your
Reserves to
Plan for
the Future

b

Building your reserves is
an essential component of a strategic
plan. While your strategic plan lays out
your plan for the future, it sets in place
a capitalization strategy. With this plan
in place, you are able to move forward
putting together a financial plan for future
growth of your system's infrastructure.
From this plan you will have the footprint
to plan for your needs and to invest
in the future.
To insure that your system will be able
to guarantee its continuity and protect
its assets, put together a plan for your
needs. The first step to creating a plan
includes looking at existing infrastructure
and asking the hard questions: how long
will these assets last, what will the needs
be to maintain the existing system and
what are the expansion needs and plans
for the future.
The next step is to project out your
income and look at the expense of

maintaining versus the cost of a new build
for existing infrastructure. If looking at
expanding your system, look at estimated
costs. Once you have done the research
and written the plan, you will have what
your total future costs will be to maintain
the existing system and to expand the
system. When putting together these
numbers, be sure to include an escalation
factor for future costs.
Now comes the big question, how are
you going to pay for this? The best answer
is to build a reserve to meet your plans.
What is a reserve?
A reserve is a discretionary fund that is
partitioned from the system's unrestricted
net assets. Before starting to build your
reserve, you should have a policy in place
that allows for a reserve to be created and
to be formally acted upon by the board of
directors. The policy that allows for the
creation of a reserve should not only state
how the reserve will be created, but also

establishes a policy of how its use and
funding will be governed.
From the policy of allowing for a
reserve and having the board of directors
set the reserve, its use and its funding,
a reserve begins to be created. Your
restricted reserve should have a definite
purpose stated, how it is to be funded, and
a defined period of time.
The defining purpose will help your
system determine the size of the reserve.
The defining scope of need will come from
the planning you have previously done.
Next is the determination of how
should we build our reserve. You can
base it on the approximate accumulated
depreciation, on the estimated
replacement value or the capital needs
assessment. The use of accumulated
depreciation uses the theory of an
assumed lifespan, which is based on the
initial cost of the system and also, on the
estimated life of the system. This method
RURAL WATER

21

SOFIAWORLD/SHUTTERSTOCK.COM

BY CLAUDETTE ATWOOD, CHIEF FINANCIAL OFFICER, NRWA



Table of Contents for the Digital Edition of Rural Water - Quarter 3, 2018

From the President
Infrastructure and Rural Water
Rural Prosperity Through Infrastructure, Partnerships and Innovation
Building Your Reserves to Plan for the Future
Rural Water Loan Fund Helps Small System Repair Well After Lightning Strike
State Rural Water Association Profile: Kansas Rural Water Association
A Day in the Life of a Circuit Rider
Regulatory Update
Case Study: Screw Pumps Provide Treatment Plant with Efficient Alternative
Up the Creek: The Secret of Longevity
Index to Advertisers/Advertisers.com
From the CEO
Rural Water - Quarter 3, 2018 - Intro
Rural Water - Quarter 3, 2018 - bellyband1
Rural Water - Quarter 3, 2018 - bellyband2
Rural Water - Quarter 3, 2018 - cover1
Rural Water - Quarter 3, 2018 - cover2
Rural Water - Quarter 3, 2018 - 3
Rural Water - Quarter 3, 2018 - 4
Rural Water - Quarter 3, 2018 - 5
Rural Water - Quarter 3, 2018 - 6
Rural Water - Quarter 3, 2018 - 7
Rural Water - Quarter 3, 2018 - 8
Rural Water - Quarter 3, 2018 - 9
Rural Water - Quarter 3, 2018 - 10
Rural Water - Quarter 3, 2018 - From the President
Rural Water - Quarter 3, 2018 - Infrastructure and Rural Water
Rural Water - Quarter 3, 2018 - 13
Rural Water - Quarter 3, 2018 - 14
Rural Water - Quarter 3, 2018 - 15
Rural Water - Quarter 3, 2018 - 16
Rural Water - Quarter 3, 2018 - 17
Rural Water - Quarter 3, 2018 - Rural Prosperity Through Infrastructure, Partnerships and Innovation
Rural Water - Quarter 3, 2018 - 19
Rural Water - Quarter 3, 2018 - 20
Rural Water - Quarter 3, 2018 - Building Your Reserves to Plan for the Future
Rural Water - Quarter 3, 2018 - 22
Rural Water - Quarter 3, 2018 - 23
Rural Water - Quarter 3, 2018 - 24
Rural Water - Quarter 3, 2018 - Rural Water Loan Fund Helps Small System Repair Well After Lightning Strike
Rural Water - Quarter 3, 2018 - State Rural Water Association Profile: Kansas Rural Water Association
Rural Water - Quarter 3, 2018 - 27
Rural Water - Quarter 3, 2018 - 28
Rural Water - Quarter 3, 2018 - 29
Rural Water - Quarter 3, 2018 - 30
Rural Water - Quarter 3, 2018 - A Day in the Life of a Circuit Rider
Rural Water - Quarter 3, 2018 - 32
Rural Water - Quarter 3, 2018 - 33
Rural Water - Quarter 3, 2018 - 34
Rural Water - Quarter 3, 2018 - Regulatory Update
Rural Water - Quarter 3, 2018 - 36
Rural Water - Quarter 3, 2018 - 37
Rural Water - Quarter 3, 2018 - 38
Rural Water - Quarter 3, 2018 - 39
Rural Water - Quarter 3, 2018 - 40
Rural Water - Quarter 3, 2018 - Case Study: Screw Pumps Provide Treatment Plant with Efficient Alternative
Rural Water - Quarter 3, 2018 - 42
Rural Water - Quarter 3, 2018 - 43
Rural Water - Quarter 3, 2018 - 44
Rural Water - Quarter 3, 2018 - Up the Creek: The Secret of Longevity
Rural Water - Quarter 3, 2018 - 46
Rural Water - Quarter 3, 2018 - 47
Rural Water - Quarter 3, 2018 - Index to Advertisers/Advertisers.com
Rural Water - Quarter 3, 2018 - 49
Rural Water - Quarter 3, 2018 - From the CEO
Rural Water - Quarter 3, 2018 - cover3
Rural Water - Quarter 3, 2018 - cover4
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