The Recovery Act provided $6 billion for EPA’s Clean Water and Drinking  Water SRF programs. In  addition to increasing funds, the Recovery Act included some new  requirements for the SRF programs. All Recovery Act SRF Program Funds Have Been Awarded and Obligated, and with Some Exceptions, States Reported Supporting Major Infrastructure Projects and Helping Economically Disadvantaged Communities

Nationwide, the 50 states have awarded and obligated the almost $6 billion  in Clean Water and Drinking Water SRF program funds provided under the  Recovery Act and reported using the majority of these funds for sewage  treatment infrastructure and drinking water treatment and distribution  systems, according to EPA data. In the nine states we reviewed, the states  used these funds to pay for infrastructure projects that help to address  major water quality problems, although state officials said that in some  cases, Recovery Act requirements changed their priorities or the projects  selected for funding. Requirement to Award Recovery Act Funds to Projects under Contract within 1 Year

As we reported in May 2010, EPA indicated that all 50 states met the  Recovery Act requirement to award Recovery Act funds to projects under  contract by February 17, 2010, 1 year after the enactment of the Recovery  Act. 2). In the nine states we reviewed, officials said that Recovery Act priorities— including the requirements for projects to be ready to proceed to contract  1 year after the passage of the Recovery Act or for green projects—either  changed their priorities for ranking and funding projects or changed the  projects they funded. States Supported Economically Disadvantaged Communities, in Part by Using Additional Subsidies Authorized under the Act, although Officials Cited Continuing Difficulty in Helping These Communities

Although the Recovery Act did not require states to target Clean and  Drinking Water SRF program funds to economically disadvantaged  communities, six of the nine states that we reviewed distributed more than  $123 million in clean water funds, and eight of the nine states distributed  almost $78 million in drinking water funds under the SRF Recovery Act  programs to these communities. Number of FTEs Have Declined as Most Recovery Act Funds Are Spent

For the quarter ending December 2009 through the quarter ending June  2010, the number of FTEs paid for with Recovery Act SRF program funds  increased each reporting quarter, from about 6,000 to 15,000 FTEs for  planning, designing, and building water projects (see fig. As projects  were completed and funds spent, the number of FTEs funded had declined  to about 6,000 for the quarter ending March 2011. EPA’s Monitoring Found That States Largely Complied with Recovery Act Requirements

Since the Recovery Act was enacted, EPA officials have reviewed all 50  states’ Recovery Act Clean and Drinking Water SRF programs at least once  and have found that states are largely complying with the act’s  requirements. EPA updated its  oversight plan for Recovery Act funds, in part, as a response to our  recommendation. We compared EPA’s data on awards and funds drawn down by states with  data reported by states on Recovery.gov and found only a few minor  inconsistencies in the data. Nine States Checked Quality of Recovery Act Data Quarterly, but Minor FTE Discrepancies Occurred

Officials in the nine states we reviewed indicated that the quality of  recipient data has remained relatively stable, although we found that the  states differed in how they reported state agencies’ FTE data and did not  report some subrecipients’ FTE data. The effort to support green projects was  included in EPA’s fiscal year 2010 and 2011 appropriations for the base  Clean and Drinking Water SRF programs. Officials in four other states said that  while they all met the 20 percent green project goal, it was difficult to  achieve, leading one official to suggest that green projects be encouraged  without setting a fixed percentage of program funds. Providing additional subsidies. State officials pointed out that when monies are not repaid into the  revolving fund, the reuse of funds is reduced and the purpose of the  revolving SRF program changes from primarily providing loans for  investments in water infrastructure to providing grants. Agency Comments and Our Evaluation

We provided a draft of the report to the Environmental Protection Agency  for review and comment. In addition, this report is available at no charge on  the GAO Web site at http://www.gao.gov. Appendix I: Objectives, Scope, and Methodology

The objectives of this review were to examine the (1) status and use of  American Recovery and Reinvestment Act of 2009 (Recovery Act) Clean  and Drinking Water State Revolving Funds (SRF) program funds  nationwide and in selected states; (2) actions taken by federal, state, and  other agencies to monitor and ensure accountability of these program  funds; (3) approaches federal agencies and selected states have taken to  ensure data quality, including data for jobs reported by recipients of these  program funds; and (4) challenges, if any, that states have faced in  implementing Recovery Act requirements for the Clean and Drinking  Water SRF programs. In the nine states that we  reviewed in this report, program officials described their site visits to  projects and the use of the EPA inspection checklist (or state equivalent),  according to EPA’s oversight plan.
Why GAO Did This Study

The American Recovery and Reinvestment Act of 2009 (Recovery Act) provided $4 billion for the Environmental Protection Agency's (EPA) Clean Water State Revolving Fund (SRF) and $2 billion for the agency's Drinking Water SRF. The Recovery Act requires GAO to review funds made available under the act and comment on recipients' reports of jobs created and retained. These jobs are reported as full-time equivalent (FTE) positions on a Web site created for the Recovery Act on www.Recovery.gov . GAO examined the (1) status and use of Recovery Act SRF program funds nationwide and in nine states; (2) EPA and state actions to monitor the act's SRF program funds; (3) EPA and selected states' approaches to ensure data quality, including for jobs reported by recipients of the act's funds; and (4) challenges, if any, that states have faced in implementing the act's requirements. For this work, GAO, among other things, obtained and analyzed EPA nationwide data on the status of Recovery Act clean and drinking water funds and projects and information from a nonprobability sample of nine states that represent all but 1 of EPA's 10 regions. GAO also interviewed EPA and state officials on their experiences with the Recovery Act SRF program funds.

What GAO Found

The 50 states have awarded and obligated the almost $6 billion in Clean Water and Drinking Water SRF program funds provided under the Recovery Act, and EPA indicated that all 50 states met the act's requirement to award funds to projects under contract 1 year after the act's passage. States used the funds to support more than 3,000 water quality projects, and according to EPA data, the majority of the funds were used for sewage treatment infrastructure and drinking water treatment and distribution systems. Since the act was passed, states have drawn down almost 80 percent of the SRF program funds provided under the act. According to EPA data, states met the act's requirements that at least (1) 20 percent of the funds be used to support "green" projects and (2) 50 percent of the funds be provided as additional subsidies. In the nine states GAO reviewed, the act's funds paid for 419 infrastructure projects that helped address major water quality problems, but state officials said in some cases the act's requirements changed their priorities for ranking projects or the projects selected. In addition, although not required by the act, the nine states used about a quarter of the funds they received to pay for projects in economically disadvantaged communities, most in additional subsidies. EPA, states, and state or private auditors took actions to monitor Recovery Act SRF program funds. For example, EPA officials reviewed all 50 states' Recovery Act SRF programs at least once and found that states were largely complying with the act's requirements. Also, in part as a response to a GAO recommendation, in June 2010 EPA updated--and is largely following--its oversight plan, which describes monitoring actions for the SRF programs. Furthermore, state officials visited sites to monitor Recovery Act projects, as indicated in the plan, and found few problems. Officials at EPA and in the nine states have also regularly checked the quality of data on Recovery.gov and stated that the quality has remained relatively stable, although GAO identified minor inconsistencies in the FTE data that states reported. Overall, the 50 states reported that the Recovery Act SRF programs funded an increasing number of FTE positions for the quarter ending December 2009 through the quarter ending June 2010, from about 6,000 FTEs to 15,000 FTEs. As projects were completed and funds spent, these FTEs had declined to about 6,000 FTEs for the quarter ending March 2011. Some state officials GAO interviewed identified challenges in implementing the Recovery Act's Clean and Drinking Water SRF requirements for green projects and additional subsidies, both of which were continued with some variation, in the fiscal year 2010 and 2011 appropriations for the SRF programs. Officials in four states said achieving the green-funding goal was difficult, with one suggesting that the 20 percent target be changed. In addition, officials in two of the four states, as well as in two other states, noted that when monies are not repaid into revolving funds to generate future revenue for these funds, the SRF program purpose changes from primarily providing loans for investments in water infrastructure to providing grants.

What GAO Recommends

GAO is making no recommendations in this report, which was provided to EPA for its review and comment. EPA did not comment on the report.