United States Government Accountability Office

GAO Report to the Honorable Gordon Smith, 

U.S. Senate 

WATER RESOURCES

Four Federal Agencies 

Provide Funding for 

Rural Water Supply 

and Wastewater 

Projects 

September 2007 

 

GAO-07-1094 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2007

WATER RESOURCES

Four Federal Agencies Provide Funding 

for Rural Water Supply and Wastewater 

Projects 

Highlights of GAO-07-1094, a report to the 

Honorable Gordon Smith, U.S. Senate 

Rural areas generally lack adequate

funds for constructing and

upgrading water supply and 

wastewater treatment facilities. As 

a result, they typically rely on 

federal grants and loans, primarily

from the Rural Utilities Service

(RUS), Economic Development 

Administration (EDA), Bureau of

Reclamation (Reclamation), and 

the U.S. Army Corps of Engineers 

(Corps), to fund these projects. 

Concern has been raised about 

potential overlap between the 

projects these agencies fund. For 

fiscal years 2004 through 2006 GAO

determined the (1) amount of 

funding these agencies obligated

for rural water projects and (2)

extent to which each agency’s

eligibility criteria and the projects 

they fund differed. 

GAO analyzed each agency’s 

financial data and reviewed

applicable statutes, regulations, 

and policies. 

What GAO Recommends

GAO recommends actions to 

ensure that the Congress has 

adequate information to determine 

whether rural water supply and

wastewater projects that the Corps 

funds merit continued funding or 

duplicate other agency efforts. 

In its comments on a draft of this 

report, the Department of Defense

concurred with GAO’s findings and 

recommendation. The Departments

of Agriculture, Commerce, and the 

Interior also agreed with GAO’s 

findings. 

From fiscal years 2004 through 2006, RUS, EDA, Reclamation, and the Corps 

obligated nearly $4.7 billion to about 3,100 rural water supply and 

wastewater projects. RUS obligated the majority of these funds––about $4.2 

billion––to about 2,800 projects. Of this $4.2 billion, RUS loans accounted for 

about $2.7 billion, and RUS grants accounted for about $1.5 billion. EDA, 

Reclamation, and the Corps, combined, obligated a total of about 

$500 million in grants to rural communities for about 300 water projects. 

Percentage of Rural Water Supply and Wastewater Projects and Funds Obligated by RUS, 

EDA, Reclamation, and the Corps, Fiscal Years 2004 through 2006 

90% 89%

<1%

Reclamation

5%

EDA

5%

Corps

RUS

5%

Reclamation

3%

EDA

3%

Corps

RUS

Source: GAO.

3,104 rural water supply and wastewater projects Total obligations of $4.7 billion

Note: Numbers may not add to 100 percent due to rounding. 

RUS, EDA, Reclamation, and the Corps fund similar rural water supply and 

wastewater projects, but they have varied eligibility criteria that limit 

funding to certain communities based on population size, economic need, or 

geographic location. RUS, EDA, and the Corps provide funding for both 

water supply and wastewater projects, while Reclamation provides funding 

only for water supply projects. Eligible water projects can include 

constructing or upgrading distribution lines, treatment plants, and pumping 

stations. RUS and EDA have formal nationwide programs with standardized

eligibility criteria and processes under which communities compete for 

funding. In contrast, Reclamation and the Corps fund water projects in 

defined geographic locations under explicit congressional authorizations. In 

2006 the Congress passed the Rural Water Supply Act, directing Reclamation 

to develop a rural water supply program with standard eligibility criteria.

The Corps continues to fund rural water supply and wastewater projects 

under specific congressional authorizations, many of which are pilot 

programs. The Congress required the Corps to evaluate the effectiveness of 

these various pilot programs and recommend whether they should be 

implemented on a national basis. The Corps has only completed some of the 

required evaluations and, in most cases, has not made the recommendations 

that the Congress requested about whether or not the projects carried out 

under these pilot programs should be implemented on a national basis. 

www.gao.gov/cgi-bin/getrpt?GAO-07-1094.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Anu K. Mittal at 

(202) 512-3841or mittala@gao.gov. 
Contents 

Letter 1

Results in Brief 3 

Background 4

Four Agencies Obligated about $5 Billion for Rural Water Supply 

and Wastewater Projects during Fiscal Years 2004 through 2006 6 

Agencies Fund Similar Rural Water Supply and Wastewater 

Projects, but their Eligibility Criteria Vary 14 

Conclusions 25

Recommendation for Executive Action 25 

Agency Comments and Our Evaluation 25 

Appendix I Scope and Methodology 27 

Appendix II Agency Overhead Cost Information, Fiscal Years 2004 

through 2006 31 

RUS and EDA 31 

Reclamation 31

Corps 32

Appendix III Comments from the Department of Defense 33 

Appendix IV Comments from the Department of the Interior 35 

Appendix V GAO Contact and Staff Acknowledgments 36 

Tables 

Table 1: Number of Projects and Obligations for Rural Water 

Supply and Wastewater Projects for Four Federal 

Agencies for Fiscal Years 2004 through 2006 7 

Table 2: Type of Rural Water Projects, Funding Mechanisms, and 

Eligibility Criteria of Four Federal Agencies 14 

Table 3: Number of RUS Funded Rural Water Supply and 

Wastewater Projects by State, Fiscal Years 2004 through 

2006 16 

Page i GAO-07-1094 Water Resources
Table 4: Number of EDA Funded Rural Water Supply and 

Wastewater Projects by State, Fiscal Years 2004 through 

2006 19 

Table 5: Number of Reclamation Funded Rural Water Supply 

Projects by State, Fiscal Years 2004 through 2006 21 

Table 6: Number of Corps Funded Rural Water Supply and 

Wastewater Projects by State, Fiscal Years 2004 through 

2006 23 

Table 7: Agencies’ Definitions of Rural Area 28 

Table 8: Rural Water Supply and Wastewater Projects Selected for 

GAO Site Visits 29 

Table 9: Total Obligations, Indirect Obligations, and FTEs for 

Reclamation’s 11 Rural Water Supply Projects, Fiscal 

Years 2004 through 2006 32 

Figures 

Figure 1: RUS Funded Rural Water Supply and Wastewater 

Projects, Fiscal Years 2004 through 2006 8 

Figure 2: EDA Funded Rural Water Supply and Wastewater 

Projects, Fiscal Years 2004 through 2006 9 

Figure 3: Reclamation Funded Rural Water Supply Projects, Fiscal 

Years 2004 through 2006 10 

Figure 4: Corps Funded Rural Water Supply and Wastewater 

Projects, Fiscal Years 2004 through 2006 11 

Figure 5: Location of the Mni Wiconi Project, South Dakota 13 

Page ii GAO-07-1094 Water Resources
Abbreviations 

Corps U.S. Army Corps of Engineers 

EDA Economic Development Administration 

EPA Environmental Protection Agency 

FTE full-time equivalent 

G&A General and Administrative 

OMB Office of Management and Budget 

Reclamation Bureau of Reclamation

RUS Rural Utilities Service 

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Page iii GAO-07-1094 Water Resources
United States Government Accountability Office

Washington, DC 20548 

September 7, 2007 

The Honorable Gordon Smith 

United States Senate 

Dear Senator Smith: 

More than 90 percent of public water supply systems and 70 percent of 

wastewater systems throughout the United States serve communities with 

populations of fewer than 10,000, usually in rural areas.1

 The 

Environmental Protection Agency (EPA) estimates that these water supply 

and wastewater systems will require about $64 billion in upgrades to meet

federal water quality standards. However, rural areas typically lack 

adequate funds for constructing and upgrading water supply and 

wastewater treatment facilities. Urban areas can take advantage of 

economies of scale by spreading the costs of projects among larger 

populations, which rural areas cannot. According to EPA, the perhousehold cost for water supply and wastewater projects in these areas is

almost four times more than the per-household cost of similar projects in 

more urban areas. As a result, communities in rural areas often have to 

rely on federal grants and loans to help finance their water supply and 

wastewater projects. 

As we reported in 2005,2

 while several federal agencies provide funding for 

rural water supply and wastewater projects, these projects are primarily 

funded by the U.S. Department of Agriculture’s Rural Utilities Service 

(RUS),3

 the Department of Commerce’s Economic Development 

Administration (EDA), the Department of the Interior’s Bureau of 

Reclamation (Reclamation), and the U.S. Army Corps of Engineers 

 1

The federal government has not established a formal or consistent definition of what

constitutes a rural area, but federal agencies usually define rural areas by population

thresholds that range from fewer than 2,500 to fewer than 50,000. 

2

GAO, Freshwater Programs: Federal Agencies’ Funding in the United States and

Abroad, GAO-05-253 (Washington, D.C.: Mar. 11, 2005).

3

The Rural Utilities Service is one of several subagencies within Agriculture’s Rural 

Development agency. 

Page 1 GAO-07-1094 Water Resources
(Corps).4

 Historically, RUS has provided grants and loans to construct or 

improve water supply and wastewater facilities in rural areas. Similarly, 

EDA has provided grants to economically distressed communities, 

including those in rural areas, to revitalize, expand, and upgrade their 

physical infrastructure, which includes water supply and wastewater 

facilities. In contrast, Reclamation has traditionally funded large water 

infrastructure projects to irrigate the arid western states, while the Corps 

has primarily funded water-related infrastructure for inland navigation and 

flood control purposes. More recently, the Congress has directed 

Reclamation and the Corps to provide funding for water supply and 

wastewater treatment projects, including some in rural areas, raising 

concerns about potential overlap between these projects and those 

traditionally funded by RUS and EDA. 

In this context, you asked us to determine (1) for fiscal years 2004 through 

2006, how much federal funding RUS, EDA, Reclamation, and the Corps 

obligated for rural water supply and wastewater projects and (2) to what 

extent each agency’s eligibility criteria and the projects they fund differ. In

addition, you asked us to determine, to the extent possible, the total 

overhead costs and number of personnel needed to manage rural water 

supply and wastewater projects at each agency during fiscal years 2004 

through 2006. This information is included in an appendix to this report. 

To determine the amount of funding RUS, EDA, Reclamation, and the 

Corps provided, we collected and analyzed each agency’s obligations for 

rural water supply and wastewater projects during fiscal years 2004 

through 2006. To determine the extent to which each agency’s eligibility 

criteria and the projects they fund differ, we reviewed and analyzed 

applicable statutes, agency regulations, policy guidance, and project 

specific data submitted by each agency to us. In addition, we selected a 

nonprobability sample of 16 rural water supply and wastewater projects, 

including at least one project funded by each of the four agencies, and 

interviewed both local officials from the communities sponsoring these 

projects and federal agency officials responsible for managing the funding

of these projects. To the extent possible, we also analyzed the amount of 

 4

For the purposes of this report, federal funding includes grants and loans. The Department

of Housing and Urban Development and EPA also provide substantial funding for water 

supply and wastewater projects in rural areas. However, these agencies do not provide

funding directly to rural communities for water supply and wastewater projects, but rather 

they provide funding to state governments that administer the funds and set funding 

priorities. Therefore, these agencies are not included in this report. 

Page 2 GAO-07-1094 Water Resources
overhead costs and number of personnel necessary to support these 

projects at each agency. A more detailed description of our scope and 

methodology is presented in appendix I. We performed our work from

September 2006 through August 2007 in accordance with generally 

accepted auditing standards. 

RUS, EDA, Reclamation, and the Corps obligated nearly $4.7 billion for 

about 3,100 rural water supply and wastewater projects from fiscal years 

2004 through 2006. RUS obligated nearly 90 percent of these funds––about 

$4.2 billion––for about 2,800 projects. Of the $4.2 billion, RUS loans 

accounted for about $2.7 billion, and RUS grants accounted for about $1.5 

billion. In contrast, EDA, Reclamation, and the Corps together provided a 

total of about $500 million in grants to rural communities for about 300 

projects. While RUS provided the majority of the funding and supported 

the largest number of projects, Reclamation provided the most funding per 

project. For example, the average RUS grant was approximately $680,000 

per project, while the average Reclamation grant was nearly $22 million 

per project. EDA and Corps grants averaged about $1 million and $800,000 

per project, respectively.

Results in Brief 

RUS, EDA, Reclamation, and the Corps fund similar rural water supply 

and wastewater projects, but their varying eligibility criteria can restrict 

funding to specific communities based on population size, economic need, 

or geographic location. Specifically, RUS, EDA, and the Corps provide 

funding for both water supply and wastewater projects, while Reclamation 

only provides funding for water supply projects. Water supply and 

wastewater projects funded by these agencies primarily include the 

construction or upgrading of distribution lines, treatment plants, and 

pumping stations. RUS and EDA have established formal nationwide 

programs with standardized eligibility criteria and processes under which 

communities compete for funding. For example, RUS’ criteria requires 

projects to be located in a city or town with a population of 10,000 or less, 

while EDA’s criteria requires projects to be located in economically 

distressed communities, regardless of the size of the population served, 

and the projects must save or create jobs. In contrast, Reclamation and the 

Corps have not historically had rural water supply and wastewater 

programs; rather, they have provided funding to specific projects in 

defined geographic locations under explicit congressional authorizations. 

For example, the Mni Wiconi Project Act of 1988, as amended, directs 

Reclamation to provide funding to three Indian tribes and seven counties 

for a water supply project in South Dakota. Similarly, a section of the 

Water Resources Development Act of 1999, as amended, directs the Corps 

Page 3 GAO-07-1094 Water Resources
to provide funding to water supply and wastewater projects in Idaho, 

Montana, rural Nevada, New Mexico, and rural Utah. More recently, the 

Congress passed the Rural Water Supply Act of 2006, directing 

Reclamation to develop a rural water supply program with standard 

eligibility criteria within 1 year and to assess within 2 years how the rural 

water projects that Reclamation funds will complement those projects 

being funded by other federal agencies. However, the Corps continues to 

fund rural water supply and wastewater projects under specific 

congressional authorizations, many of which are pilot programs. We found 

that, during fiscal years 2004 through 2006, the Corps completed more 

than 100 rural water supply and wastewater projects under various pilot 

programs. The Corps was required to evaluate the effectiveness of the 

projects funded under these various pilot programs and recommend to the 

Congress whether they should be implemented on a national basis. The 

Corps has completed most of the evaluations required under the various

pilot programs, but, in most cases, the Corps either did not make a 

recommendation or concluded that it had not completed enough projects

to make meaningful recommendations. In the absence of these evaluations 

and recommendations, the Congress does not have information on 

whether, collectively, the projects carried out under the Corps’ pilot 

programs merit continued funding, duplicate other agency efforts, or 

should be implemented on a national basis. We are recommending that the 

Corps provide the Congress a comprehensive report on the water supply 

and wastewater projects it has funded and determine whether or not these 

programs should continue to be funded by the Corps. In commenting on a 

draft of this report, the Department of Defense concurred with our 

findings and recommendation. The Department of the Interior also agreed

with our findings and the Departments of Agriculture and Commerce 

provided technical comments, which we have incorporated throughout the 

report, as appropriate. 

RUS, EDA, Reclamation, and the Corps each have distinct missions and 

fund rural water supply and wastewater projects under separate programs 

and congressional authorizations. Furthermore, each agency has its own 

definition of what constitutes a rural area and a unique organizational 

structure to implement its programs. Specifically,

Background 

• RUS administers the U.S. Department of Agriculture’s rural utilities 

programs throughout the country, which are aimed at expanding 

electricity, telecommunications, and water and waste disposal services. 

RUS provides assistance for water supply and wastewater projects 

through its Water and Environmental Program and defines rural areas for 

Page 4 GAO-07-1094 Water Resources
this program as incorporated cities and towns with a population of 10,000 

or fewer and unincorporated areas, regardless of population. RUS 

manages this program through its headquarters in Washington, D.C., and 

47 state offices, each supported by area and local offices. 

• EDA provides development assistance to areas experiencing substantial 

economic distress regardless of whether or not they are rural or urban. 

EDA primarily provides assistance for water supply and wastewater 

projects in distressed areas through its Public Works and Development 

Facilities Program and uses a U.S. Census Bureau definition for rural areas 

that is based on metropolitan statistical areas.5 EDA manages this program 

through its headquarters in Washington, D.C., six regional offices, and 

multiple field personnel.

• Reclamation was established to implement the Reclamation Act of 1902, 

which authorized the construction of water projects to provide water for 

irrigation in the arid western states. Reclamation generally manages 

numerous municipal and industrial projects as part of larger, multipurpose 

projects that provide irrigation, flood control, power, and recreational 

opportunities in 17 western states, unless otherwise directed by the 

Congress.6

 Reclamation provides assistance for water supply projects 

through individual project authorizations and defines a rural area as a 

community, or group of communities, each of which has a population of 

not more than 50,000 inhabitants.7

 Reclamation manages these projects 

through its headquarters in Washington, D.C., and Denver, Colorado, five

regional offices, and multiple field offices in the western United States. 

• The Corps’ Civil Works programs investigate, develop, and maintain water 

and related environmental resources throughout the country to meet the 

agency’s navigation, flood control, and ecosystem restoration missions. In 

addition, the Civil Works programs also provide disaster response, as well 

as engineering and technical services. The Corps provides assistance for 

 5

Metropolitan statistical areas are based on county-level data with central cities of at least 

50,000 residents and surrounding contiguous counties that are metropolitan in character

and economically tied to the core counties. Rural areas may be within or outside such 

areas. 

6

The Reclamation states include Arizona, California, Colorado, Idaho, Kansas, Montana, 

Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas,

Utah, Washington, and Wyoming. 

7

Reclamation’s definition of a rural area was established by Pub. L. No. 109–451, enacted 

December 22, 2006. 

Page 5 GAO-07-1094 Water Resources
water supply and wastewater projects through authorizations for either a 

project in a specific location, or for a program in a defined geographic 

area, and does not have a definition for rural areas.8 The Corps administers 

its programs and projects through its Headquarters in Washington, D.C., 

eight regional divisions, and 38 district offices. 

These agencies rely on several sources of funding—including annual 

appropriations from the general fund and from dedicated funding sources, 

such as trust funds—to provide financial support for these projects and 

programs. 

RUS, EDA, Reclamation, and the Corps obligated $4.7 billion to 3,104 rural 

water supply and wastewater projects from fiscal years 2004 through 

2006.

9

 Of these obligations, RUS obligated nearly $4.2 billion (or about 90 

percent) of the funding—about $1.5 billion in grants and about $2.7 billion 

in loans10—to about 2,800 projects. EDA, Reclamation, and the Corps 

provided a combined $500 million in grants to rural communities for about 

300 water supply and wastewater projects. Table 1 shows the number of 

projects and the amount of obligations for rural water supply and 

wastewater projects by agency for fiscal years 2004 through 2006. Figures 

1 through 4 show the location of these rural water supply and wastewater 

projects by agency during fiscal years 2004 through 2006. 

Four Agencies 

Obligated about 

$5 Billion for Rural 

Water Supply and 

Wastewater Projects 

during Fiscal Years 

2004 through 2006 

 8

Corps officials agreed to use the U.S. Census Bureau’s density-based urban and rural

classification system to determine which Corps projects were in rural areas. Using this 

approach, we determined for purposes of this report, rural areas for Corps’ projects 

include all nonurbanized areas and urban clusters with populations of less than 20,000, as

well as certain areas in Nevada and Utah that the Congress defined as rural for specific 

Corps projects. 

9

Obligations represent amounts for orders placed, contracts awarded, services received, 

and similar transactions during a given period that will require payments during the same 

or a future period. Obligations differ from expenditures in that an expenditure is the

issuance of a check, disbursement of cash, or electronic transfer of funds made to liquidate 

an obligation. Because, in some circumstances, expenditures made during a specific fiscal 

year may fulfill an obligation during prior years, obligations provide the best estimate of 

what an agency plans to spend during a fiscal year. 

10Since a high level of repayment is expected on these loans, the ultimate cost to the federal 

government for these loans is significantly less than the amount of the loans provided. 

Accordingly, $2.7 billion is higher than the actual cost to the federal government. 

Page 6 GAO-07-1094 Water Resources
Table 1: Number of Projects and Obligations for Rural Water Supply and Wastewater Projects for Four Federal Agencies for 

Fiscal Years 2004 through 2006 

Dollars in thousands 

Grants Loans

Agency 

Number of 

projects 

Total

obligations Number Obligations Average Number Obligations Average

RUS 2,802 $4,154,651 2,117a$1,439,681 $680 2,287a$2,714,971 $1,187

EDA 142 153,505 142 153,505 1,081 b b b

Reclamation 11 240,185 11 240,185 21,835 b b b

Corps 149 118,519 149 118,519 795 b b b

Total 3,104 $4,666,860 2,419 $1,951,890 $807 2,287 $2,714,971 $1,187

Sources: GAO analysis of RUS, EDA, Reclamation, and Corps data. 

a

The total number of grants and loans does not equal the total number of projects because, in some 

cases, projects received a combination of both grants and loans. 

b

Data not applicable. 

Page 7 GAO-07-1094 Water Resources
Figure 1: RUS Funded Rural Water Supply and Wastewater Projects, Fiscal Years 2004 through 2006 

Source: GAO analysis of RUS data.

Page 8 GAO-07-1094 Water Resources
Figure 2: EDA Funded Rural Water Supply and Wastewater Projects, Fiscal Years 2004 through 2006 

Source: GAO analysis of EDA data.

Page 9 GAO-07-1094 Water Resources
Figure 3: Reclamation Funded Rural Water Supply Projects, Fiscal Years 2004 through 2006 

Source: GAO analysis of Reclamation data.

Page 10 GAO-07-1094 Water Resources
Figure 4: Corps Funded Rural Water Supply and Wastewater Projects, Fiscal Years 2004 through 2006 

Source: GAO analysis of Corps data.

Page 11 GAO-07-1094 Water Resources
RUS provided the majority of the funding to the largest number of 

projects, while Reclamation provided the largest amount of funding per 

project. As table 1 shows, the average RUS grant was approximately 

$680,000 per project, while the average Reclamation grant was about $22 

million per project. EDA and Corps grants averaged about $1 million and 

$800,000 per project, respectively. The average Reclamation grant amount 

was significantly larger than the grant amounts provided by the other 

agencies because Reclamation provided funding to a relatively small 

number of large regional water supply projects that span multiple 

communities. For example, during fiscal years 2004 through 2006, 

Reclamation obligated nearly $87 million of the about $459 million 

estimated total cost for the Mni Wiconi project. This project will provide 

potable water to about 51,000 people in rural communities spanning seven 

counties and three Indian Reservations. The Mni Wiconi project covers 

approximately 12,500 square miles of the state of South Dakota or roughly 

16 percent of the state’s total land area. Figure 5 shows the location of the 

Mni Wiconi project area.

Page 12 GAO-07-1094 Water Resources
Figure 5: Location of the Mni Wiconi Project, South Dakota

Pierre

Cheyanne River

Missouri River

South Dakota

The shaded portion represents the entire project area for the Mni Wiconi project

funded by Reclamation.

The project location consists of seven counties and three Indian Reservations,

covering about 16 percent of the land area in the state of South Dakota.

Sources: GAO and Reclamation.

In contrast, the other three agencies primarily provided funding to 

relatively smaller scale projects located in single communities. For 

example, Penns Grove, New Jersey, a community with a population of 

about 5,000, received an $800,000 EDA grant to upgrade a wastewater 

treatment plant with an estimated total project cost of $1.16 million. 

Page 13 GAO-07-1094 Water Resources
Similarly, according to Corps officials, Monticello, Kentucky, a community 

with a population of about 6,000, received about $312,500 from the Corps 

for two sewer line extensions with total project costs of about $435,000. 

This community also received about $1 million from RUS for water and 

sewer line upgrades with an estimated total project cost of about $1.4 

million. 

While the types of projects RUS, EDA, Reclamation, and the Corps fund 

are similar, varying agency eligibility criteria can limit funding to certain 

communities based on their population size, economic need, or geographic 

location. Specifically, RUS and EDA have established nationwide 

programs with standardized eligibility criteria and processes under which 

communities compete for funding. In contrast, Reclamation and the Corps 

have historically provided funding to congressionally authorized projects 

in certain geographic locations, without standardized eligibility criteria. 

Table 2 shows the types of projects each agency funds, the funding 

mechanisms they use, and their eligibility criteria. 

Agencies Fund 

Similar Rural Water 

Supply and 

Wastewater Projects, 

but their Eligibility 

Criteria Vary 

Table 2: Type of Rural Water Projects, Funding Mechanisms, and Eligibility Criteria of Four Federal Agencies 

Type of project

Funding

mechanism Eligibility criteria

Federal 

agency 

Water 

supply

Wastewater Grant Loan

Project must 

meet 

standardized

national 

criteria

Project must 

serve a city 

or town with

a population

of 10,000 or

lessa

Project area is 

geographically

restricted by

statute 

Project area 

must be 

economically

distressed

Project must 

provide

economic

development 

in the region

RUS X X X X X X

EDA X X X X XbXc

Corps X X XdX

Reclamation X X X

Sources: GAO analysis of RUS, EDA, Reclamation, and Corps regulations and program guidance. 

a

Project may also serve an unincorporated rural area, regardless of the area’s population. 

b

EDA defines an area as economically distressed if it meets one of the following three conditions: (1) 

an unemployment rate that is at least 1 percent greater than the national average, (2) a per capita 

income that is 80 percent or less of the national average, or (3) has experienced or is about to 

experience a special need arising from changes in economic conditions. 

c

Economic development consists of the creation or retention of higher skilled, higher wage jobs and/or 

the attraction of private capital investment. 

d

In some cases, projects are funded through reimbursable payments from the Corps for project costs 

already accrued.

Page 14 GAO-07-1094 Water Resources
The rural water projects that RUS, EDA, Reclamation, and the Corps fund 

are similar, and all four agencies use similar funding mechanisms. While 

Reclamation primarily provides funding for water supply projects, RUS, 

EDA, and the Corps fund both water supply and wastewater projects. 

These projects primarily include the construction or upgrading of water or

wastewater distribution lines, treatment plants, and pumping stations. For 

example, all four agencies funded water line expansions or upgrades in 

either residential or commercial areas. RUS, EDA, and the Corps also 

funded sewer line extensions into either residential or commercial areas. 

RUS and EDA have established nationwide programs with standardized 

eligibility criteria and processes under which communities compete for 

funding. Specifically, RUS’ eligibility criteria require projects to be located

in a city or town with a population of less than 10,000 or an 

unincorporated rural area, regardless of the area’s population. EDA’s 

eligibility criteria require projects to be located in economically distressed 

communities, regardless of the size of the community served, and the 

project must also create or retain jobs. 

RUS’ eligibility criteria require water supply or wastewater projects to 

serve rural areas. A project must be located in a city or town with a 

population of less than 10,000 or in an unincorporated rural area 

regardless of the population. For example, St. Gabriel, Louisiana, with a 

population of about 6,600, received RUS funding to expand sewer lines to 

connect residents to a wastewater treatment plant. Similarly, Laurel 

County Water District No. 2, which provides potable water to about 17,000 

residents who live in unincorporated rural areas of southeastern Kentucky 

between the cities of London, Kentucky, and Corbin, Kentucky, received 

RUS funding to upgrade a water treatment plant to accommodate potential 

growth opportunities in the area. Table 3 provides the number of RUS 

funded rural water supply and wastewater projects by state for fiscal years

2004 through 2006. 

RUS, EDA, Reclamation, 

and the Corps Fund 

Similar Rural Water Supply 

and Wastewater Projects 

RUS and EDA Have

Nationwide Water Supply 

and Wastewater Programs 

with Standard Eligibility 

Criteria 

RUS Only Provides Funding for 

Water Supply and Wastewater 

Projects Located in Rural Areas 

Page 15 GAO-07-1094 Water Resources
Table 3: Number of RUS Funded Rural Water Supply and Wastewater Projects by State, Fiscal Years 2004 through 2006 

State 

Number of rural water 

supply projects

Number of rural 

wastewater projects

Number of combined rural water 

supply and wastewater projects Total

Alabama 38 16 0 54

Alaska 1 2 6 9

Arizona 18 6 0 24

Arkansas 93 23 7 123

California 47 31 2 80

Colorado 15 4 2 21

Connecticut 2 7 0 9

Delaware 4 5 0 9

Florida 13 10 6 29

Georgia 12 8 0 20

Hawaii 3 0 0 3

Idaho 30 20 4 54

Illinois 84 18 4 106

Indiana 17 31 2 50

Iowa 39 35 0 74

Kansas 28 17 1 46

Kentucky 76 28 3 107

Louisiana 65 19 0 84

Maine 30 35 2 67

Maryland 14 14 2 30

Massachusetts 18 11 0 29

Michigan 42 53 0 95

Minnesota 16 34 10 60

Mississippi 99 15 6 120

Missouri 56 57 4 117

Montana 22 12 0 34

Nebraska 34 14 1 49

Nevada 13 11 0 24

New Hampshire 9 6 4 19

New Jersey 4 21 2 27

New Mexico 47 17 3 67

New York 93 41 0 134

North Carolina 40 23 5 68

North Dakota 31 5 4 40

Ohio 19 46 1 66

Page 16 GAO-07-1094 Water Resources
State 

Number of rural water 

supply projects

Number of rural 

wastewater projects

Number of combined rural water 

supply and wastewater projects Total

Oklahoma 29 24 2 55

Oregon 16 15 2 33

Pennsylvania 10 48 2 60

Rhode Island 10 3 1 14

South Carolina 33 10 7 50

South Dakota 34 17 6 57

Tennessee 90 24 9 123

Texas 116 43 12 171

Utah 21 4 1 26

Vermont 13 11 2 26

Virginia 27 28 4 59

Washington 28 13 5 46

West Virginia 54 16 2 72

Wisconsin 23 27 1 51

Wyoming 7 3 1 11

Total 1,683 981 138 2,802

Source: GAO analysis of RUS data. 

To apply for RUS funding for a water supply or wastewater project, a 

community must submit a formal application. Once the formal application 

is submitted, communities then compete for funding with other projects 

throughout the state. In general, RUS officials in the state office rank each

proposed project according to the project’s ability to alleviate a public 

health issue, the community’s median household income, and other 

factors. As applications are reviewed and ranked on a rolling basis, RUS 

officials in the state office generally decide which projects will receive 

funding until all funds are obligated for the fiscal year. 

RUS provides both grants and loans for eligible projects, and communities 

must meet certain requirements depending upon the type of assistance 

they are requesting. For example, RUS grants can be used to finance up to

75 percent of a project’s cost based on a number of factors including a 

community’s financial need and median household income. Alternatively, 

to receive a loan, the community must certify in writing, and RUS must 

determine, that the community is unable to finance the proposed project 

from their own resources or through commercial credit at reasonable rates 

and terms. For projects also funded through RUS loans, RUS requires the 

community to charge user fees that, at a minimum, cover the costs of 

operating and maintaining the water system while also meeting the 

Page 17 GAO-07-1094 Water Resources
required principal and interest payments on the loan. For example, RUS 

provided the Wood Creek Water District, located in Laurel County, 

Kentucky, a $1 million grant and a $7.98 million loan for a major water 

treatment plant expansion. A Wood Creek official told us that the water 

district had attempted to obtain a loan from a commercial lender; 

however, the loan would have had an interest rate of 7 percent and a term 

of 20 years, which would have rendered the project financially unfeasible. 

According to RUS, Wood Creek was able to receive a loan with an interest

rate of 4.3 percent and a term of 40 years, thereby significantly reducing

the annual loan payments. RUS also required Wood Creek to slightly 

increase its user fees to support the operation and maintenance of the 

water system and cover the loan repayment. 

EDA’s eligibility criteria require water supply or wastewater projects to be 

located in an economically distressed area, regardless of the area’s 

population size. EDA defines an area as economically distressed if it meets 

one of the following three conditions: the area has (1) an unemployment 

rate that is at least 1 percent greater than the national average, (2) a per 

capita income that is 80 percent or less of the national average, or (3) has 

experienced or is about to experience a special need arising from changes 

in economic conditions. The project must also create or retain long-term 

private sector jobs and/or attract private capital investment. For example, 

Assumption Parish Waterworks District No.1 in Napoleonville, Louisiana, 

received EDA funding to upgrade water service to two sugarcane mills. 

The community qualified for the funding because Assumption Parish met 

EDA’s criteria for unemployment and per capita income. The water supply 

project allowed the sugarcane mills to maintain and expand their 

operations, saving 200 existing jobs, creating 17 new jobs, and attracting 

$12.5 million in private investment. Table 4 provides the number of EDA 

funded rural water supply and wastewater projects by state for fiscal years

2004 through 2006. 

EDA Provides Funding to 

Projects in Areas Experiencing 

Economic Distress 

Page 18 GAO-07-1094 Water Resources
Table 4: Number of EDA Funded Rural Water Supply and Wastewater Projects by State, Fiscal Years 2004 through 2006 

State 

Number of rural water 

supply projects

Number of rural 

wastewater projects

Number of combined rural water 

supply and wastewater projects Total

Alabama 4 1 4 9

Alaska 0 0 1 1

Arkansas 0 1 3 4

California 2 1 0 3

Colorado 0 1 0 1

Florida 1 0 0 1

Georgia 0 4 2 6

Idaho 0 0 2 2

Illinois 3 1 0 4

Indiana 1 2 1 4

Iowa 3 0 0 3

Kansas 0 0 1 1

Kentucky 2 2 4 8

Louisiana 1 2 1 4

Maine 0 1 0 1

Michigan 1 0 2 3

Minnesota 0 3 1 4

Mississippi 2 0 2 4

Missouri 1 0 1 2

Montana 2 0 0 2

Nebraska 4 0 0 4

Nevada 0 1 0 1

New Jersey 1 1 0 2

New Mexico 0 0 1 1

New York 1 1 1 3

North Carolina 4 4 1 9

North Dakota 0 0 1 1

Ohio 0 1 3 4

Oklahoma 1 0 2 3

Oregon 1 0 0 1

Pennsylvania 1 3 1 5

South Carolina 2 3 1 6

South Dakota 1 1 0 2

Tennessee 2 6 0 8

Texas 2 0 3 5

Page 19 GAO-07-1094 Water Resources
State 

Number of rural water 

supply projects

Number of rural 

wastewater projects

Number of combined rural water 

supply and wastewater projects Total

Utah 0 0 2 2

Vermont 0 1 0 1

Virginia 1 1 0 2

Washington 1 1 0 2

West Virginia 3 1 5 9

Wisconsin 0 0 4 4

Total 48 44 50 142

Source: GAO analysis of EDA data. 

To apply for EDA funding for a water supply or wastewater project, the 

community must submit a preapplication to an EDA Regional Office. If the 

proposed project is found eligible, the community must then submit a 

formal application to an EDA Regional Office. The Regional Office then 

prioritizes and makes funding decisions that are forwarded to EDA 

headquarters for approval. These decisions are based upon, among other 

things, how the project promotes innovative, entrepreneurial, or long-term 

economic development efforts. EDA applications are reviewed on a rolling 

basis, and funding decisions are made until all of the funds for the fiscal 

year are obligated. 

EDA provides grants for eligible projects that may finance 50 to 100 

percent of a project’s total costs based on a number of factors including an

area’s level of economic distress. For example, the London-Laurel County 

Industrial Development Authority located in Laurel County, Kentucky, 

qualified for an EDA grant because the county has a per capita income of 

$14,165, which is 66 percent of the national average. Because Laurel 

County’s per capita income was between 60 to 70 percent of the national

average, EDA’s grant could fund no more than 60 percent of the project’s

total cost. The project received a $950,000 grant, which covered 50 percent 

of the $1.9 million total project cost to construct water and sewer line 

extensions for an industrial park. The new occupants of this industrial 

park were expecting to create 425 new jobs and provide $20.9 million in 

private investment. 

Page 20 GAO-07-1094 Water Resources
Reclamation and the Corps have not historically had rural water supply 

and wastewater programs; rather they have provided funding to specific 

projects or programs in certain geographic locations under explicit 

congressional authorizations. Although the Corps continues to provide 

assistance to projects under specific congressional authorizations, many 

of which are pilot programs, the Rural Water Supply Act of 200611 directed 

Reclamation to establish a rural water supply program with standardized 

eligibility criteria. 

Reclamation provides grants to individual rural water supply projects in 

eligible communities for which the Congress has specifically authorized 

and appropriated funds. These grants finance varying amounts of a 

project’s total costs depending upon the specific authorization. According 

to a program assessment conducted by the Office of Management and 

Budget (OMB), the Congress has chosen Reclamation to fill a void for 

projects that are larger and more complex than other rural water projects 

and which do not meet the criteria of other rural water programs. For 

example, the Mni Wiconi Project Act of 1988, as amended, directs 

Reclamation to provide funding to three Indian tribes and seven counties 

for a rural water supply project in South Dakota that encompasses 16 

percent of state’s total land area. For the Mni Wiconi project, Reclamation

grants provide funding for 100 percent of the project costs on Indian lands 

and 80 percent of the project costs on non-Indian lands. Table 5 provides 

the number of Reclamation funded rural water supply projects by state for 

fiscal years 2004 through 2006. 

Reclamation and the Corps 

Provide Congressionally 

Directed Funding for 

Specific Projects, without 

Standard Eligibility 

Criteria 

Reclamation Funds Specific 

Congressionally Authorized 

Projects and Is Also 

Establishing a Rural Water 

Supply Program 

Table 5: Number of Reclamation Funded Rural Water Supply Projects by State,

Fiscal Years 2004 through 2006 

Dollars in thousands 

State Number of rural water supply projects Funds obligated

Montana 2 $33,197

Nebraska 1 213

New Mexico 3 2,053

North Dakota 1 35,510

South Dakota 4a169,212

Total 11 $240,185

Source: GAO analysis of Reclamation data. 

 11Pub. L. No. 109-451 (Dec. 22, 2006). 

Page 21 GAO-07-1094 Water Resources
a

One of the four rural water supply projects located in South Dakota is also located in portions of

southwestern Minnesota and northwestern Iowa. 

While rural water supply projects are outside of Reclamation’s traditional

mission, according to Reclamation officials, the agency became involved 

in such projects because individual communities or groups of 

communities proposed projects directly to the Congress. In response, the 

Congress created specific authorizations for these rural water supply 

projects, and Reclamation was designated responsibility for funding and 

overseeing the construction of the projects. Because Reclamation is 

responding to Congressional direction in implementing these projects, it 

has not established eligibility criteria for communities or prioritized these 

projects for funding. In a May 11, 2005 testimony, the Commissioner of the 

Bureau of Reclamation indicated that the agency would like more 

authority to plan and oversee the development and construction of rural 

water supply projects. 

In 2006, the Congress passed the Rural Water Supply Act directing 

Reclamation to develop a rural water supply program. Within 1 year, 

Reclamation was required to develop standardized criteria to determine 

eligibility requirements for rural communities and prioritize funding 

requests under this program. Further, the act directed Reclamation to 

assess within 2 years how the rural water supply projects funded by 

Reclamation will complement those being funded by other federal 

agencies. Reclamation is now beginning to address these requirements, 

including: (1) developing programmatic criteria to determine eligibility for 

participation and (2) assessing the status of authorized rural water supply 

projects and other federal programs that address rural water supply 

issues. According to a Reclamation official, the agency plans to complete 

these requirements by August 2008 and December 2008, respectively.

Reclamation officials also said the development of a rural water supply 

program will, among other things, allow Reclamation to be directly 

involved in the planning, design, and prioritization of rural water supply 

projects and provide recommendations to the Congress regarding which 

projects should be funded for construction. Projects recommended for 

funding by Reclamation must still receive a specific congressional 

authorization for design and construction. 

The Corps funds rural water supply and wastewater projects under 

specific congressional authorizations, many of which are pilot programs, 

and makes funding available to specific communities or programs in 

certain geographic areas. For example, a section of the Water Resources 

Development Act of 1999, as amended, authorized a pilot program that 

The Corps Funds 

Congressionally Authorized 

Projects, Usually through Pilot 

Programs 

Page 22 GAO-07-1094 Water Resources
directed the Corps to provide funding to water supply and wastewater 

projects to communities in Idaho, Montana, rural Nevada, New Mexico, 

and rural Utah. When directed to fund these types of projects, the Corps 

provides either grants or reimbursements for project costs incurred by the 

community. To receive reimbursements, a community submits invoices 

received from its contractors to the Corps, and the Corps generally 

reimburses the community up to 75 percent of project costs. Table 6 

provides the number of Corps funded rural water supply and wastewater 

projects by state for fiscal years 2004 through 2006. 

Table 6: Number of Corps Funded Rural Water Supply and Wastewater Projects by State, Fiscal Years 2004 through 2006 

State 

Number of rural water 

supply projects

Number of rural 

wastewater projects

Number of combined rural water 

supply and wastewater projects Total

Arkansas 1 0 0 1

California 3 1 1 5

Idaho 2 5 0 7

Kentucky 0 14 0 14

Louisiana 0 0 2 2

Michigan 0 6 0 6

Minnesota 3 6 0 9

Mississippi 2 8 2 12

Montana 2 2 0 4

Nevada 4 12 0 16

New Mexico 3 5 2 10

New York 0 3 0 3

North Carolina 0 2 0 2

Ohio 7 10 1 18

Pennsylvania 6 8 4 18

Tennessee 1 0 0 1

Utah 5 4 1 10

West Virginia 0 7 0 7

Wisconsin 2 2 0 4

Total 41 95 13 149

Source: GAO analysis of Corps data. 

Even though the Corps provides congressionally directed funding to 

specific geographic areas through these pilot programs, eligibility criteria 

and the degree to which projects compete for funding can differ between

programs. For example, the Corps’ Southern and Eastern Kentucky 

Page 23 GAO-07-1094 Water Resources
Environmental Improvement Program is available only to communities 

located in 29 counties in southeastern Kentucky. The program requires 

these communities to submit formal applications, which are prioritized 

and ranked annually against all received applications. The Corps, in 

conjunction with a nonprofit organization, selects projects for funding 

based on certain factors such as economic need. For example, the Wood

Creek Water District submitted a formal application and received 

approximately $500,000 in reimbursements––about 72 percent of the total

project costs––to extend sewer service to a school and 154 households 

who live near the school. In contrast, the Corps’ Rural Utah Program is 

available to communities in 24 counties and part of another county that 

the Congress designated as rural. This program requires communities in 

these counties to submit a request letter that includes, among other things, 

a brief project description and an estimate of total project costs. Request 

letters are considered for funding on a rolling basis by Corps officials, and 

no other formal eligibility criteria exist. For example, Park City, Utah, 

submitted a letter that provided a project description and the estimated 

total cost for the project. According to a Corps official, the Corps 

evaluated the letter and provided approximately $300,000 in 

reimbursements––or about 60 percent of the total project costs––for the 

replacement of water and sewer lines in Park City’s Old Town area. 

While the Corps funds projects carried out under these pilot programs as 

directed by the Congress, it does not request funds for them as part of its 

annual budget process because, according to Corps officials, these types 

of projects fall outside the Corps’ primary mission of navigation, flood 

control, and ecosystem restoration. This position was reiterated in a May 

11, 2007, policy document released by OMB, which stated that funding of

such local water supply and wastewater projects is outside of the Corps’ 

mission, costs taxpayers hundreds of millions of dollars, and diverts funds 

from more meritorious Corps Civil Works projects. 

When the Congress authorized the Corps to fund these various pilot 

programs, it also required the agency to evaluate the effectiveness of 

several of them and recommend to the Congress whether these pilot 

programs should be implemented on a national basis. The Corps has 

completed 9 of the 12 required evaluations. Of the completed evaluations,

only four made recommendations––all in favor of the establishment of a 

national program. The other five evaluations either did not make the 

required recommendation or stated that the agency had not yet funded 

enough projects to effectively evaluate the program. However, we found 

that between fiscal years 2004 and 2006, the Corps provided funding to 

over 100 rural water supply and wastewater projects under pilot programs, 

Page 24 GAO-07-1094 Water Resources
and it is unclear why the Corps has still not completed all of the 

evaluations required by the Congress. In the absence of the outstanding 

evaluations and recommendations, the Congress does not have 

information on whether, collectively, the projects carried out under the 

Corps’ pilot programs merit continued funding, duplicate other agency 

efforts, or should be implemented on a national basis. 

The Congress has determined that RUS, EDA, and now Reclamation 

should provide funding for rural water projects as part of their overall 

missions and target federal assistance to certain communities based on 

their population size, economic need, or geographic location. However, for 

the Corps, the Congress has not yet determined whether funding of rural

water supply projects should permanently be included within the agency’s 

water portfolio. To help inform congressional decision making on this 

issue, the Corps was required to evaluate its various water supply and 

wastewater pilot programs and recommend to the Congress whether these 

programs should be continued. However, the Corps has not consistently 

provided the information required by the Congress even though it has 

completed over 100 rural water projects under various pilot programs. As 

a result, the Congress does not have the information it needs to determine 

whether the Corps’ projects meet a previously unmet rural water need or 

duplicate the efforts of other agencies. Such information is important for 

making decisions on how to allocate limited federal resources in a time 

when the nation continues to face long-term fiscal challenges. 

To ensure that the Congress has the information it needs to determine 

whether the Corps should continue to fund rural water supply and 

wastewater projects, we recommend that the Secretary of Defense direct 

the Commanding General and the Chief of Engineers of the U.S. Army 

Corps of Engineers to provide a comprehensive report on the water supply 

and wastewater projects that the Corps has funded under its pilot 

programs and determine whether these pilot programs duplicate other 

agency efforts and should be discontinued, or whether these pilot 

programs address an unmet need and should be expanded and made 

permanent at a national level. 

We provided the Departments of Agriculture, Commerce, Defense, and the 

Interior with a draft of this report for review and comment. The 

Department of Defense concurred with GAO’s findings and 

recommendation, and its written comments are included in appendix III. 

Conclusions 

Recommendation for 

Executive Action 

Agency Comments 

and Our Evaluation 

Page 25 GAO-07-1094 Water Resources
The Department of the Interior also agreed with GAO’s findings, and its 

written comments are included in appendix IV. The Departments of 

Agriculture and Commerce provided us with technical comments, which 

we have incorporated throughout the report, as appropriate.

We will send copies of this report to interested congressional committees;

the Secretaries of Agriculture, Commerce, Defense, and the Interior; and 

other interested parties. We will also make copies available to others upon 

request. In addition, the report will be available at no charge on the GAO 

Web site at http://www.gao.gov. 

If you or your staff has any questions about this report, please contact me 

at (202) 512-3841, or Mittala@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Key contributors to this report are listed in appendix V. 

Sincerely yours, 

Anu K. Mittal 

Director, Natural Resources 

 and Environment 

Page 26 GAO-07-1094 Water Resources
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

To determine how much federal funding the U.S. Department of 

Agriculture’s Rural Utilities Service (RUS), the Department of Commerce’s 

Economic Development Administration (EDA), the Department of the 

Interior’s Bureau of Reclamation (Reclamation), and the U.S. Army Corps 

of Engineers (Corps) obligated for rural water supply and wastewater 

projects for fiscal years 2004 through 2006, we collected and analyzed 

obligation and project location data submitted by each agency. We 

determined that the data were sufficiently reliable for the purposes of this 

report. To identify water supply and wastewater projects that were located 

in rural areas, we applied the definition of rural used by RUS, EDA, and 

Reclamation to the geographic location each agency provided for its water 

supply and wastewater projects.1

 Because the Corps does not have a 

definition for rural areas, we asked the Corps to use the U.S. Census 

Bureau’s density-based urban and rural classification system to identify 

projects that it funds in rural areas. This classification system divides 

geographical areas into urban areas, urban clusters, and nonurban areas 

and clusters. Using this information, we determined that Corps funded 

water supply and wastewater projects were in rural areas if they were 

located in: (1) any nonurban areas or clusters, (2) urban clusters with a 

population of less than 20,000, and (3) areas of Nevada and Utah that the 

Congress specifically defined as rural in the Water Resources 

Development Act of 1999, as amended. Table 7 provides the definition of 

rural area used by each agency for water supply and wastewater projects.

 1

The federal government has not established a formal or consistent definition of what

constitutes a “rural” area. The term “rural” is defined differently by the Congress and each 

federal agency according to agency guidelines and individual project or program 

authorizations. Depending on the agency, rural areas may be defined as ranging from less

than 2,500 to less than 50,000 persons. 

Page 27 GAO-07-1094 Water Resources
Appendix I: Scope and Methodology 

Table 7: Agencies’ Definitions of Rural Area 

Agency Definition of rural area 

RUS Rural areas include incorporated cities and towns with a population of 

10,000 or fewer and unincorporated areas, regardless of population. 

EDA Rural areas include areas the U.S. Census Bureau designates as rural 

that are within or outside of a metropolitan statistical area.

a

Reclamation Rural areas include a community, or group of communities, each of which 

has a population of not more than 50,000 inhabitants.b

Corps The Corps does not define rural areas.c

Sources: RUS, EDA, Reclamation, and the Corps. 

a

Metropolitan statistical areas are based on county-level data with central cities of at least 50,000 

residents and surrounding contiguous counties that are metropolitan in character and economically 

tied to the core counties. Rural areas may be within or outside such areas. 

b

Reclamation’s definition of a rural area was established by Pub. L. No. 109–451 (Dec. 22, 2006). 

c

Corps officials agreed to use the U.S. Census Bureau’s density-based urban and rural classification 

system to determine which Corps projects were in rural areas. Using this approach, we determined 

for purposes of this report, rural areas for Corps projects include all nonurbanized areas and urban 

clusters with populations of less than 20,000, as well as areas in Nevada and Utah that the Congress 

specifically defined as rural for Corps projects. 

To determine the extent to which each RUS, EDA, Reclamation, and the

Corps eligibility criteria and the projects they fund differed, we reviewed 

and analyzed applicable statutes, agency regulations, and policy guidance. 

In addition, we used a nonprobability sample to select 16 rural water 

supply and wastewater projects, including at least one project funded by

each of the four agencies, and conducted site visits to each of the selected

projects. These projects were selected based upon project type (water 

supply or wastewater), geographic location, type of assistance (loan, 

grant, or a combination of these) and the federal agency funding the 

project. During the site visits, we interviewed local officials from the 

communities receiving funding and federal agency officials responsible for 

managing the funding of those projects. We also collected and analyzed 

project-specific documentation such as applications and letters of intent.

Table 8 lists the 16 projects we selected for site visits and the type of 

project, location, type of assistance, and funding agency(ies) for each 

project. 

Page 28 GAO-07-1094 Water Resources
Appendix I: Scope and Methodology 

Table 8: Rural Water Supply and Wastewater Projects Selected for GAO Site Visits

Project name Project type Project location 

Type of 

assistancea

Funding

agencyb

Ascension Parish Environmental Infrastructure Water supply and 

wastewater 

Ascension Parish, 

La. 

Grant Corps

Assumption Parish Water Works District No. 1 Water 

System Improvements 

Water supply Assumption

Parish, La. 

Grant EDA

Bluffdale Water Storage Water supply Bluffdale City, 

Utah 

Loan RUS

Jamestown Water Treatment Plant Upgrade Water supply Jamestown, Ky. Grant 

Loan and grant

EDA 

RUS 

Laurel County Water District No. 2, Water Treatment Plant 

Expansion 

Water supply Laurel County, 

Ky. 

Loan and grant RUS 

London-Laurel County Industrial Development Authority 

No. 2 Water and Sewer Line Extensions 

Water supply and 

wastewater 

London, Ky. Grant EDA 

Wood Creek Water District Water Treatment Plant 

Expansion 

Water supply London, Ky. Grant 

Loan and grant

EDA 

RUS 

Wood Creek Water District Sewer Line Extension Wastewater London, Ky. Grant Corps

College St. Sewer Line Extension Wastewater Monticello, Ky. Grant Corps

Downtown Water and Sewer Line Replacement Water supply and 

wastewater 

Monticello, Ky. Loan and grant RUS 

Webster St. Sewer Line Extension Wastewater Monticello, Ky. Grant Corps

Park City Municipal Corporation Prospect Avenue Water 

and Sewer Line Replacement Project 

Water supply and 

wastewater 

Park City, Utah Grant Corps 

Penns Grove Wastewater Treatment Plant Upgrade Wastewater Penns Grove, 

N.J. 

Grant EDA

Snyderville Basin Water Supply Master Plan Water supply Park City, Utah Grant Corps 

Mni Wiconi Rural Water Supply Project Water supply S. Dak. Grant Reclamation

St. Gabriel Wastewater Treatment Sewer Line Extension Wastewater St. Gabriel, La. Loan and grant RUS 

Source: GAO.

a

In some cases, Corps projects are funded through reimbursable payments from the Corps for project 

costs already accrued. 

b

In some instances, rural communities may be eligible to receive funding from multiple agencies. As a 

result, RUS and EDA signed a memorandum of understanding regarding projects that qualify for both

EDA and RUS funding. For example, if EDA decides to provide a grant to a RUS funded project, EDA 

transfers those funds to RUS which then administers and distributes them. 

To determine the overhead costs and number of personnel needed to

support rural water supply and wastewater projects, we collected and 

analyzed agency policy guidance and interviewed agency officials to 

determine the extent to which RUS, EDA, Reclamation, and the Corps 

tracks these data for rural water supply and wastewater projects. We also 

Page 29 GAO-07-1094 Water Resources
Appendix I: Scope and Methodology 

requested these data from each agency to the extent they could provide 

them to us. 

We conducted our work from September 2006 through August 2007 in

accordance with generally accepted auditing standards. 

Page 30 GAO-07-1094 Water Resources
Appendix

Information

 II: Agency Overhead Cost 

, Fiscal Years 2004 through 2006 

Page 31 GAO-07-1094

Appendix II: Agency Overhead Cost 

Information, Fiscal Years 2004 through 2006 

The U.S. Department of Agriculture’s Rural Utilities Service (RUS), the 

Department of Commerce’s Economic Development Administration 

(EDA), the Department of the Interior’s Bureau of Reclamation 

(Reclamation), and the U.S. Army Corps of Engineers (Corps) each 

calculate their overhead costs, commonly referred to as general and 

administrative (G&A) costs,1

 and the number of personnel needed to 

manage rural water supply and wastewater projects, referred to as fulltime equivalents (FTE),2

 differently. This appendix describes how each 

agency calculates these costs for rural water supply and wastewater 

projects. 

RUS and EDA each receive separate appropriations to fund their 

agencywide G&A costs. These agencies do not track these costs or FTEs 

on a project-by-project basis. Therefore, we were unable to calculate each 

agencies total G&A costs and total FTEs by rural water supply and 

wastewater project. 

Reclamation divides water supply project costs into two categories, direct 

costs and indirect costs.3 According to Reclamation, if all activities are 

correctly and consistently charged, then all activities assigned to indirect 

costs can be considered overhead costs for a project. Although a standard

formula is used to determine indirect cost rates, which are applied as a 

percentage of labor, Reclamation officials stated that the rates may vary by

area office and region depending primarily on the amount of costs that can 

be charged directly to a project. Furthermore, according to documentation 

provided by Reclamation officials, these indirect cost rates were updated

each fiscal year. As can be seen in table 9, Reclamation provided the 

RUS and EDA 

Reclamation 

 1

G&A costs typically cover items such as office supplies, buildings, equipment, and

personnel expenses. 

2

An FTE reflects the total number of regular straight-time hours (i.e., not including 

overtime or holiday hours) worked by employees divided by the number of compensable 

hours applicable to each fiscal year. Annual leave, sick leave, and compensatory time off 

and other approved leave categories are considered to be “hours worked” for purposes of

defining FTE employment. 

3

Direct costs include all costs that can be specifically and readily identified with an output 

such as a vehicle being used solely by an employee on a specific project. Indirect costs

include costs that are jointly or commonly used to produce two or more outputs and 

typically include overhead costs such as a secretary whose job is to provide support to an

area office in which there are a variety of projects and programs. 

Water Resources
Appendix II: Agency Overhead Cost 

Information, Fiscal Years 2004 through 2006 

following indirect costs and FTE estimates for the 11 rural water projects

for which Reclamation obligated funds for fiscal years 2004 through 2006. 

Table 9: Total Obligations, Indirect Obligations, and FTEs for Reclamation’s 11 Rural Water Supply Projects, Fiscal Years 

2004 through 2006

Dollars in thousands 

Fiscal year Total obligations Indirect obligationsa

Percentage of indirect 

obligations FTEs

2004 $77,237 $1,194 1.5% 27

2005 $81,077 $1,253 1.5% 26

2006 $81,871 $1,147 1.4% 25

Source: GAO analysis of Reclamation data. 

a

Indirect obligations is the term used by Reclamation to indicate obligations made for indirect project 

costs. 

The Corps’ G&A costs for its headquarters and divisions are funded 

through a general expenses appropriation. G&A costs at the district level

are distributed to projects and programs through the use of predetermined

rates established by the district Commander at the beginning of each fiscal

year and are automatically distributed to specific projects or programs 

based on the direct labor charged to the projects or programs. 

Corps 

There are two types of overhead costs charged by the districts, general 

and administrative overhead and departmental overhead. General and

administrative overhead includes administrative and support costs 

incurred in the day-to-day operations of a district. Departmental overhead 

includes costs incurred within technical divisions at the district 

headquarters that are not attributable to a specific project or program. 

While a standard formula is used to determine overhead rates, these rates 

may vary by district depending on a variety of factors including, 

geographic location—an office in a high cost area will cost more to 

operate than a similar office in a rural area, and composition of the 

workforce—an office staffed by senior-level employees will cost more to 

operate than an office staffed by junior-level employees. 

The Corps G&A costs and FTE data for its water supply and wastewater 

projects are calculated at the program level and cover projects in both 

rural and urban areas. The Corps could not readily provide these data for 

obligations on a rural water supply and wastewater project basis. 

Page 32 GAO-07-1094 Water Resources
Appendix III: Comments from the Department Appendix III: Comments from the of Defense 

Department of Defense 

Page 33 GAO-07-1094 Water Resources
Appendix III: Comments from the Department 

of Defense 

Page 34 GAO-07-1094 Water Resources
Appendix IV: Comments from the Department Appendix IV of the Interior : Comments from the 

Department of the Interior 

Page 35 GAO-07-1094 Water Resources
Appendix V: 

A

GAO Contact and Staff 

cknowledgments 

Page 36 GAO-07-1094

Appendix V: GAO Contact and Staff 

Acknowledgments 

Anu K. Mittal, (202) 512-3841, mittala@gao.gov

In addition to the individual named above, Ed Zadjura, Assistant Director; 

Patrick Bernard; Diana Goody; John Mingus; Lynn Musser; Alison O’Neill; 

Matthew Reinhart; and Barbara R. Timmerman made significant 

contributions to this report. 

Water Resources

GAO Contact 

Staff 

Acknowledgments 

(360754) 
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