Abstract
We identified the deficiency in the conventional accounting system in capturing water-loss-related information and its effect on cost-saving decisions in a water utility in South Africa. We employed the material flow cost accounting (MFCA) model in the case of the Doorndraai Water Treatment Scheme to highlight inefficient phases of the water purification processes for the manager to identify opportunities for corrective action. Findings reveal that the inability of the conventional accounting system in accurately capturing water loss information limits the scheme manager’s ability to recognize cost-saving opportunities. Consequently, we found that the implementation of the material flow cost accounting (MFCA) model identified the pumping process as a major contributor to the water scheme’s daily operating loss because of the pumping machine’s low capacitor. Besides, this pumping machine has been in operation for about five years, an indication that the water scheme had been operating at a loss daily for a number of years. Thus, we suggested that the water scheme should invest in procuring a more suitable pumping device to reduce the huge electricity cost incurred daily by the Doorndraai Water Treatment Scheme. Besides this, the paper extended the implementation of the MFCA by providing an example of how the managerial accounting system can support environmental and economic sustainability in water purification processes. Thus, we reiterate that one way of effectively managing water resources is to appropriately capture the volume of water loss and water-purification-related costs to improve its efficiency.
Highlights
Previous water accounting studies have focused on the traditional input-output system, especially in the purification process, thereby neglecting to account for other systems costs vital to the determination of appropriate water pricing by water treatment schemes (Molden & Sakhivadivel, 1999; Vardon et al, 2006; Launiainen, Futter, Ellison, Clarke, Finer & Hogbom, 2014; Meng et al, 2014; Tilmant, Marques & Mohamed, 2015) [1,2,3,4,5]
The Doorndraai Water Treatment Scheme uses the input-output system to determine the volume of its water loss; the challenge is that energy losses and other systems or conversion costs in water loss during purification were not included in the analysis
The non-inclusion of energy losses and other systems or conversion costs in water loss during purification is the main deficiency of the current cost accounting system used by the Doorndraai Water Treatment Scheme
Summary
Previous water accounting studies have focused on the traditional input-output system, especially in the purification process, thereby neglecting to account for other systems costs vital to the determination of appropriate water pricing by water treatment schemes (Molden & Sakhivadivel, 1999; Vardon et al, 2006; Launiainen, Futter, Ellison, Clarke, Finer & Hogbom, 2014; Meng et al, 2014; Tilmant, Marques & Mohamed, 2015) [1,2,3,4,5]. Our focus and contribution center on the lack of an integrated cost accounting model for capturing water-purification-loss-related information to support and improve water processing decisions in water utilities (mostly state-controlled) in South Africa. Such a model is necessary because water utility managers need adequate information to make informed decisions for current and future improvements. The scheme manager is assisted in the plant by the production officer (supervisor) who oversees the production process. There are instrument technicians and artisans who make up the entire workforce at the water scheme
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