Problems of providing safe water supply to the urban areas in developing cities are increasing with the increase in population. As a result, demand for additional water sources and infrastructure are growing. Very often, urban areas in developing countries are not the users of the existing water supply facilities satisfactorily. Finote Selam and Dembecha are, among the developing cities suffering shortage of safe water supply. In this study the performance of Finote Selam and Dembecha water supply systems are evaluated by using statistical analysis. Both the towns, Finote Selam having 72.8% and Dembecha 83% coverage, show less value as the bench mark for coverage of water supply can be 100%, means all of the population of the towns must have access to water. On the other hand, even, the water that has been pumped from the source is not fully addressed to the towns and this can be measured with un accounted water, for Finote Selam 32% and for Dembecha 26% this shows high value of lost from the pumped water. The financial indicator shows that comparative measure of cost and revenue, for Finote Selam there is variation of cost over benefit showing best performance in public areas and less performance with residential areas, and for Dembecha relatively better performance in financial performance having an average value of 87% of cost per benefit ratio. Among the users of the town even the problems of providing water supply to the urban towns with the recommended per capital consumption in the cities are increasing with the increase in population, as a result demand for additional water sources and infrastructure is growing. Very often, urban areas are not the users of the existing water supply facilities satisfactorily. Finote Selam and Dembecha, are of the cities suffering within shortage of safe water supply as the result of per capital consumption shows for Finote Selam 20lpd and Dembecha 15lpd. This shows measurements should be taken to improve the towns water supply performance, and this can be done with cooperation of government and the people living within the towns.