In September 2010, the U.S. Environmental Protection Agency (EPA) hosted the National Capacity Development/Operator Certification Workshop in Dallas, Texas, with 150 participants representing EPA Headquarters and Regions, states, third-party technical assistance providers, other federal agencies, academics and utility associations. The participants at the workshop wanted to continue the exchange of ideas, best practices and lessons learned after the workshop ended, as well as to collaborate to overcome challenges they identified as barriers to greater sustainability of small public water systems and further efficiencies of state programs. Participants identified a need for more information and resources to assist small systems in the development of managerial capacity. Following the national workshop, EPA brought together a group of interested attendees to further evaluate and describe best practices in evaluating and building managerial capacity. This document is a reflection of the discussions held over the course of a year by this group of individuals. It was developed to provide ideas on assessing managerial capacity for those involved in the Capacity Development Program, including EPA Headquarters staff, EPA Regional staff and state staff. In addition, this document may be informative to the staff of other programs (e.g., Drinking Water State Revolving Fund) who help public water systems (PWSs) attain and maintain technical, managerial and financial (TMF) capacity. The information contained in this document may not apply to every state program or every drinking water system within a state, but can be used to begin thinking about how managerial capacity can be assessed. The workgroup acknowledges that its not possible to completely isolate technical, managerial and financial capacity components. They are an inter-related set of knowledge, skills and resources that together make a system successful. Examples in this document emphasize financial and technical aspects of capacity that are intertwined with managerial capacity. The workgroup considers managerial capacity to be the cornerstone of this relationship. Without knowledgeable, resourceful and responsible decision-makers, water systems cannot build and maintain strong capacity.