Identifying ‘True’ Water Loss Information through the MFCA Model for Improved Cost-Saving Decisions in a Water Utility: A Case Study of the Doorndraai Water Treatment Scheme in South Africa

Michael Bamidele Fakoya and Emmanuel O. Imuezerua
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Michael Bamidele Fakoya: ACSAM, School of Accountancy, University of Limpopo, Mankweng 0727, South Africa
Emmanuel O. Imuezerua: Department of Accounting, Vaal University of Technology, Vanderbijlpark 1900, South Africa

Sustainability, 2020, vol. 12, issue 18, 1-27

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.

Keywords: material flow cost accounting; water treatment scheme; water utility; water purification process; water loss (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
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