A Quick Review of the Series So Far:
A budget involves forecasting revenues and expenses for the coming year and helps to ensure appropriate spending levels on the utility’s highest priority concerns. The budget provides a variety of benefits to everyone in the utility (especially those in management, finance, and the ultimate decision-makers) including providing greater knowledge of the water utility’s financial picture and improved control of expenditures.
A draft budget should be made and then it should be reviewed thoroughly to ensure it fits the needs and priorities of the governing body and the community it serves. It must also balance revenues and expenses with some funding remaining for deposit into reserve accounts (e.g., emergency reserves, operating capital reserves, debt service reserves). Once the budget is in its final form, it needs to be formally adopted by the governing body.
The first blog in this series, “Getting Started,” should be reviewed as a first step for guidance about getting started with the budget process. The second blog in the series should be reviewed to understand what goes into creating the budget. The third blog discusses balancing the budget, depreciation, and reserve accounts. This blog will show an example budget for a small wastewater system.
An Example Budget
It can be hard to visualize what a budget for a small system might look like. To help with that issue, this blog presents a sample budget with a few enhancements that are not likely to be included in a system’s final budget. It includes the following columns: the 2025 budgeted amounts, 2025 actual expenditures, differences between budgeted and actuals (note that numbers in “( )” are negative numbers), 2026 proposed budget, 2027 proposed budget with a 5% increase over 2025 ACTUALS, the final proposed budget for 2027, and an extra column to describe the reason why the budget value has been changed from the 5% estimated budget value. A final budget is unlikely to contain all of these columns. Most likely it would only include the actuals from last year’s budget, the current year’s budget, next year’s budget. The remaining columns would probably just be internal information.
The years used in this example represent the current time frame that this blog was written. If the sample budget is being used at a different time frame, the best way to interpret the years is FY25 = last year, FY26 = current year, FY27 = next year. Note that a utility can choose to use calendar year, rather than fiscal year, if that is how they do their accounting.
The following example budget is also available as a PDF here.
Example Budget
| Category | FY25 Budgeted Amount | FY25 Actuals | Difference between Budget and Actuals For FY25 | FY26 Budget | FY27 Proposed Budget with 5% escalation over 2025 Actuals | FY27 Proposed Budget Following Input from Staff | Comments (Input from Staff to determine what the 2027 budget should be compared to 2025 actuals and 2026 budgeted amounts) | |
| Operating Revenues | ||||||||
| Wastewater Charges | 475,000 | 497,365 | 22,365 | 512,286 | 522,233 | 500,000 | The utility is not expecting a large increase in wastewater sales. The wastewater treated is expected to be slightly higher than 2025 actuals but less than 2025 budgeted amounts. Thus far , the budget overestimates the revenues. The utility is also concerned about over-estimating revenue so wants to keep projections reasonable. | |
| Connection Fees | 12,000 | 10,000 | (2,000) | 10,300 | 10,500 | 10,000 | Originally, the utility thought there would be more customers connecting to the utility than actually occurred in 2025. The belief is that the number in 2027 will be similar to the number in 2025, so the revenue is expected to be the same as 2025 actuals. | |
| Late Charges | 3,000 | 4,000 | 1,000 | 4,120 | 4,200 | 4,200 | It is hard to predict late charges, but the utility believes that the amount will go up due to the economic conditions in the community. | |
| Other | 0 | 0 | 0 | 0 | 0 | 0 | The utility does not expect any revenue to come from other sources | |
| Total Revenues | 490,000 | 511,365 | 21,365 | 526,706 | 536,933 | 514,200 | This value is calculated. | |
| Operating Expenses | ||||||||
| Salary and Wages – Operation | 72,000 | 87,800 | 15,800 | 90,434 | 92,190 | 92,190 | The wages are expected to increase slightly so a 5% inflation factor will be used over 2025 actual amounts. The utility does not anticipate augmenting the operations workforce | |
| Salary and Wages – Administrative | 28,000 | 26,250 | (1,750) | 27,038 | 27,563 | 27,563 | Same as the operations workforce | |
| Payroll Taxes | 10,870 | 11,456 | 586 | 11,800 | 12,029 | 12,029 | Payroll taxes are anticipated to increase a bit so the inflated amount is being used. | |
| Contract Services | 5,800 | 9,800 | 4,000 | 10,094 | 10,290 | 12,000 | The original estimate in the budget was $5,800 but FY25 actuals were $9,800. The utility had to undertake more contract services to avoid hiring additional staff. It anticipates having even higher contracting. | |
| Other Personnel Expenses | 4,750 | 3,890 | (860) | 4,007 | 4,085 | 4,007 | Other personnel expenses are assumed to be the inflated number. No better information is available. | |
| Insurance – Plant and Equipment | 10,200 | 10,200 | 0 | 10,506 | 10,710 | 11,000 | Information on insurance rates for 2026 was obtained to determine an estimate. The estimate is higher than the inflated cost. | |
| Insurance – General | 2,800 | 2,800 | 0 | 2,884 | 2,940 | 3,000 | Same as above. | |
| Chemicals | 8,800 | 9,200 | 400 | 9,476 | 9,660 | 9,800 | Chemical costs have increased and slightly higher sewage flows are expected. | |
| Supplies | 5,500 | 4,700 | (800) | 4,841 | 4,935 | 4,700 | The expenditures on supplies seemed to be about what was necessary and no one seemed concerned about needing additional items. It was decided to put the estimate for 2026 at 2025 actual expenditures. | |
| Lab Fees | 12,000 | 13.050 | 1,050 | 13,442 | 13,703 | 14,000 | Lab fees have been increasing so there is a concern that the budget needs to be higher than the 3% | |
| Utilities (power) | 46,000 | 48,000 | 2,000 | 49,440 | 50,400 | 50,880 | Power is expected to increase but it is unclear by how much. Therefore using 6% increase. | |
| Utilities (other) | 3,700 | 3,650 | (50) | 3,760 | 3,833 | 3,869 | Costs expected to increase but unclear by how much. Therefore using 6% increase. | |
| Office Supplies | 4,250 | 3,680 | (570) | 3,790 | 3,864 | 3,680 | The office supplies are expected to be about the same as 2025. | |
| Vehicle Expenses | 22,050 | 26,300 | 4,250 | 27,089 | 27,615 | 30,000 | Vehicles are an increasing expense, especially as the vehicles continue to age. The costs are expected to rise higher than 5%. | |
| Travel Expenses | 1,500 | 800 | (700) | 824 | 840 | 800 | Travel has had to be curtailed to keep costs down so using actual expenditures from 2025. | |
| Professional Fees (e.g., legal, accounting) | 2,400 | 2,400 | 0 | 2,400 | 2,520 | 2,400 | The utility has a contract with an accounting firm and a lawyer to provide limited services for a fixed fee. Therefore, only $2400 is needed. | |
| Repairs and Maintenance | 16,000 | 17,650 | 1,650 | 18,180 | 18,533 | 20,000 | Repairs are expected to continue to rise at a faster rate than 5% increase. | |
| Engineering | 1,000 | 0 | (1,000) | 0 | 0 | 0 | No engineering fees were used in 2025. None are expected in 2027. | |
| Training/ Conferences | 2,400 | 650 | (1,750) | 670 | 683 | 2,400 | Since the operators’ certification is up for renewal, an amount equal to the budget in 2025 is being used. so they can attend events to get their CEUs this year. | |
| Dues | 1,000 | 980 | (20) | 1,009 | 1,029 | 1,029 | The escalated number is being used. | |
| Fees | 450 | 380 | (70) | 391 | 399 | 399 | No approximate information exists so the inflation rate is being used. | |
| Leases | 7,500 | 7,500 | 0 | 7,500 | 7,875 | 7,500 | The lease rates are not going to increase over 2025 rates. | |
| Debt Service – principle and interest | 36,800 | 36,800 | 0 | 36,800 | 38,640 | 36,800 | The annual debt service payments are the same, so no inflation is needed. | |
| Depreciation | 125,000 | 125,000 | 0 | 128,750 | 131,250 | 128,750 | The utility has decided to go with the budgeted amount from FY26 because assets were added in FY26 but are not being added in FY27. | |
| Total Operating Expenses | 430,770 | 452,936 | 22,166 | 465,123 | 475,583 | 478,795 | This is a calculated value. | |
| Net Income | 59,230 | 58,429 | (801) | 61,583 | 61,350 | 35,405 | This is a calculated value | |
| Income Available for Debt Service and Reserves | ||||||||
| Net Income | 59,230 | 58,429 | (801) | 61,583 | 61,350 | 35,405 | This is a calculated value | |
| Depreciation | 125,000 | 125,000 | 0 | 128,750 | 131,250 | 128,750 | This is a repeat of the number used for depreciation | |
| Total Available for Debt Service and Reserves | 184,230 | 183,429 | (801) | 190,333 | 192,600 | 164,155 | This is a calculated value. | |
| Transfers to Reserves | ||||||||
| Debt Service Reserve | 36,800 | 36,800 | 0 | 36,800 | 38,640 | 36,800 | The annual payment is fixed so this amount is also a fixed number. | |
| Repair and Replacements Reserve | 25,000 | 25,000 | 0 | 28,255 | 26,250 | 25,750 | This number is being increased to allow for some additional funds for repair and replacement. | |
| Capital Improvement Reserve | 47,430 | 46,629 | (801) | 48,028 | 48,960 | 26,605 | This number is calculated by taking the total available and subtracting the other reserve amounts. This reserve account accommodates any additional funds or lack of funds to keep the payments as required for the other reserve accounts. | |
| Emergency Reserve | 75,000 | 75,000 | 0 | 77,250 | 78,750 | 75,000 | This is the amount the system chooses to put into emergency reserves every year. | |
| Total Transfers to Reserves | 184,230 | 183,429 | (801) | 190.333 | 192,600 | 164,155 | This is a calculated value. | |