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Aim/Purpose: The study examines the current credit treatment of Contribution in Aid of Construction (CIAC) on investor own utilities (IOU) and its impacts on the current state of utility infrastructure in the state of FloridaBackground: The Congressional Budget Office describes a synergist contributing to the present aged utility infrastructure is the cost of replacement within the water industry. The state of Florida treats Contribution in Aid of Construction (CIAC) as a liability with a credit expense balance. The ratemaking process does not include CIACMethodology: The study used the latent change/growth structural equation model with an observed sample of 80 selected utilities. The selected utilities generated 700 observations from the financial statements. We identified and build ratios from the NRRI and Acheampong et al. utility viability model and used VIF to address multicollinearity issues and linked test to specify the inclusion of the ratios. Ten ratios were used as the explanatory variables to current total assets of IOUs.Contribution: The results may urge regulators to consider the current treatment of CIAC.Findings: The study suggests a debit treatment of the CIAC amortization expenses and the recovered amount kept in a reserved account to replace the utility infra-structure, a trend analysis comparing the credit treatment and the debit treat-ment to determine the impact of CIAC on the current credit treatment.Recommendations for Practitioners: The study complements the work completed by the study committee form by Florida House Bill No. 1389-2012, one of the findings for the committee was to establish a reserve fund for IOUs. However, they did not identify how to fund the reserve account to use to replace aged infrastructure. The results of the will enhance both practitioners and regulators understanding of the need to either maintain the current treatment of CIAC or make a policy change for CIAC to be treated with a debit balance. Both Regulators and practitioners will connect the relationship between CIAC and the total assets of utilities and find alternative means to enhance or improve the aged infrastructure within the water and wastewater industry.Recommendation for Researchers: AICPA in 2017 attempted to research into the treatment of CIAC among power and utility entities but focused on revenue recognition (FASB 606), and concluded FASB pronouncement does not address the treatment of CAIC; the study will be the first in-depth inquiry into the recognition of the of CIAC on improving the total assets of water and wastewater utilities. The study will further generate academic discussion on the inconsistent application by various states across the US on the applicability of CIAC. Should regulators or the NRRI pursue a debit or credit treatment consistently across the US and should FASB enact a pronouncement enhancing the principle-based of the method of CIACFuture Research: The study focused on the alternative treatment of CIAC and its relationship with improving total assets of aged infrastructure among water and wastewater utility. The Regulation of the water and wastewater utilities are state-specific, and the various commissions differ in several policies for the industry. The treatment of CIAC as a debit balance study is an opening-door for further research into the donated capital treatment among the various states. We recommend a study comparing states treating CIAC as a debit balance to states treating it as a credit balance and its impact on utility viability and also plant asset improvement

The Impact of Contribution in Aid of Construction on Utility Dilapidated Infrastructure: Evidence from the State of Florida [Abstract]