United States Government Accountability Office

GAO Report to the Subcommittee on 

Interior, Environment, and Related 

Agencies, Committee on 

Appropriations, House of 

Representatives 

CLEAN WATER 

How States Allocate 

Revolving Loan Funds 

and Measure Their 

Benefits 

June 2006 

 

GAO-06-579 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

June 2006

CLEAN WATER

How States Allocate Revolving Loan 

Highlights of GAO-06-579, a report to the Funds and Measure Their Benefits 

Chairman and Ranking Member, 

Subcommittee on Interior, Environment, 

and Related Agencies, Committee on 

Appropriations, House of Representatives

Since 1987, states have used 96 percent (about $50 billion) of their CWSRF 

dollars to build, upgrade, or enlarge conventional wastewater treatment 

facilities and conveyances. Projects to build or improve wastewater 

treatment plants alone account for over 60 percent of this amount, with the 

remainder supporting the construction or rehabilitation of sewer and storm 

water collection systems. CWSRF assistance for nonpoint source activities 

represents only 4 percent (about $2 billion) of CWSRF dollars, although it 

accounts for over a quarter of all CWSRF projects financed. To date, 37 

states report using some portion of their CWSRF funds to directly support 

nonpoint source activities. Nationwide, 23 percent of CWSRF funds (64 

percent of all CWSRF loan agreements) were devoted to water quality

projects in communities with populations of less than 10,000 people. 

The 50 states (and Puerto Rico) have used a variety of strategies to allocate 

CWSRF funds to meet their individual needs. For example, the state of 

Washington sets aside 20 percent of its CWSRF dollars to support nonpoint

source projects, while Alabama state law defines only traditional public 

wastewater treatment facilities as appropriate projects under its CWSRF 

program. Other states have designed their programs to target selected types

of borrowers. Pennsylvania, for example, has targeted borrowers in small or 

rural communities during the allocation process. According to EPA and 

state officials, states’ allocation strategies may change as certain states’ 

priorities and clean water needs shift. Among the reasons are (1) aging

wastewater infrastructure in need of rehabilitation or replacement; (2) 

population growth and redistribution; (3) changes in EPA enforcement 

priorities; and (4) stricter EPA and state water quality standards for 

temperature, nutrients, and sediments. 

EPA and the states use a uniform set of financial and environmental 

measures to help determine efficient and effective use of CWSRF resources. 

Financial measures include, among others, return on federal investment, the 

pace at which available funds are loaned, and the sustainability of the fund. 

EPA regional officials conduct annual reviews of each state program to help 

ensure the fiscal integrity of the state programs. All programs are also 

subject annually to independent financial audits. To measure environmental 

outcomes of CWSRF-funded projects, in fiscal year 2005, EPA developed an 

electronic benefits reporting system that all 51 programs have agreed to use. 

Currently, the system collects data only on anticipated environmental 

benefits associated with CWSRF-funded projects. However, to varying 

degrees, some states such as Oklahoma and Washington are attempting to 

gather data on actual environmental benefits from their CWSRF-funded 

projects, including nonpoint source projects. 

Communities will need hundreds of 

billions of dollars in coming years 

to construct and upgrade 

wastewater treatment facilities, 

sewer systems, and other water

infrastructure. To finance these 

efforts, they will rely heavily on 

low-interest loans from the

Environmental Protection Agency’s 

(EPA) Clean Water State Revolving 

Fund (CWSRF) program to

supplement their own funds. 

Through fiscal year 2005, states

have used their CWSRFs to provide 

communities over $52 billion for a

variety of water quality projects.

The Clean Water Act allows states 

to use their CWSRFs to (1) 

construct or improve conventional 

wastewater infrastructure, (2) 

control diffuse (nonpoint) sources

of pollution such as agricultural 

runoff and leaking septic systems,

and (3) protect federally-designated

estuaries. 

Given the states’ flexibility in 

determining how to spend CWSRF 

dollars, GAO was asked to examine 

(1) the extent to which states use 

their CWSRF dollars to support 

conventional wastewater treatment 

infrastructure versus other 

qualifying expenses, (2) the

strategies states use to allocate

their CWSRF dollars among 

qualifying expenses, and (3) the 

measures states use to ensure that

their allocation strategies result in

the most efficient and effective use 

of CWSRF dollars. EPA reviewed a 

report draft, providing technical

comments that were incorporated. 

www.gao.gov/cgi-bin/getrpt?GAO-06-579.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact John

Stephenson at (202) 512-3841 or

stephensonj@gao.gov. 
Contents 

Letter 1

Results in Brief 3

Background 4

States Have Loaned 96 Percent of Their CWSRF Funds for 

Wastewater Infrastructure, with 23 Percent Supporting Projects 

in Small Communities 8 

States’ Allocation Strategies Reflect Diverse Clean Water Needs 

and CWSRF Program Goals 20 

EPA and the States Use Specific Financial and Environmental 

Measures to Evaluate Efficient and Effective Use of CWSRF 

Resources 28

Agency Comments and Our Evaluation 32 

Appendix I Scope and Methodology 34 

Appendix II Selected Clean Water State Revolving Fund Financial 

Data 37 

Appendix III GAO Contact and Staff Acknowledgments 48 

Tables 

Table 1: States Voluntarily Reporting Use of CWSRFs to Address 

Nonpoint Sources of Water Pollution with a Wastewater 

Treatment System, Fiscal Years 1987 through 2005 17 

Table 2: Clean Water State Revolving Fund for Wastewater 

Treatment, Nonpoint Source, and Estuary Projects, by 

State, Fiscal Years 1987 through 2005 37 

Table 3: Clean Water State Revolving Fund Assistance by

Community Size, Fiscal Years 1987 through 2005 39 

Table 4: Clean Water State Revolving Fund National Financial 

Indicators, Fiscal Years 1987 through 2005 41 

Table 5: Clean Water State Revolving Funds Available for Projects, 

Fiscal Years 1987 through 2005 43 

Page i GAO-06-579 Wastewater Infrastructure 
Table 6: Assistance Provided Through the Clean Water State 

Revolving Fund Program and Other State Funded Clean 

Water and Loan Grant Programs, Fiscal Years 1987 

through 2005 46 

Figures 

Figure 1: Flow of Funds through the CWSRF Program 7 

Figure 2: CWSRF Support and Type of CWSRF-Supported Projects, 

Fiscal Years 1987 through 2005 9 

Figure 3: CWSRF Financial Assistance by Subcategory of 

Wastewater Infrastructure Projects, Fiscal Years 1987

through 2005 11 

Figure 4: CWSRF Support for Wastewater Infrastructure and 

Nonpoint Source Pollution Control Projects, Fiscal Years 

1987 through 2005 12 

Figure 5: CWSRF Support for Nonpoint Source Projects as a 

Percentage of Total CWSRF Support, Fiscal Years 1987 

through 2005 13 

Figure 6: CWSRF Support by Subcategory of Nonpoint Source 

Projects, Fiscal Years 1987 through 2005 16 

Figure 7: CWSRF Support by Community Size as a Percentage of 

Total CWSRF Support, Fiscal Years 1987 through 2005 18 

Figure 8: CWSRF Support to Small Communities as a Percentage of 

Total CWSRF Support, Fiscal Years 1987 through 2005 19 

Figure 9: Annual Average Interest Rates for the Clean Water State 

Revolving Fund Compared with Annual Average Market 

Interest Rates 45 

Page ii GAO-06-579 Wastewater Infrastructure 
Abbreviations 

CBO Congressional Budget Office 

CSO Combined Sewer Overflows 

CWSRF Clean Water State Revolving Fund 

EPA Environmental Protection Agency 

GAAP Generally Accepted Accounting Principles 

IPPS Integrated Project Priority Setting 

NIMS National Information Management System 

OMB Office of Management and Budget 

PART Program Assessment Rating Tool 

PER Program Evaluation Report 

SSO Sanitary Sewer Overflows 

TMDL Total Maximum Daily Load 

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Page iii GAO-06-579 Wastewater Infrastructure 
United States Government Accountability Office

Washington, DC 20548 

June 5, 2006

The Honorable Charles H. Taylor 

Chairman 

The Honorable Norm Dicks 

Ranking Minority Member 

Subcommittee on Interior, Environment, and Related Agencies 

Committee on Appropriations 

House of Representatives 

Recent estimates by the Environmental Protection Agency (EPA) and the 

Congressional Budget Office suggest that, over the next 15 years, local 

communities will need hundreds of billions of dollars to construct and 

upgrade aging wastewater treatment facilities, sewer systems, and other 

projects that improve water quality and help safeguard public health and 

the environment. These communities will rely on EPA’s Clean Water State 

Revolving Fund (CWSRF) to supplement the funds they obtain from their 

ratepayers to finance these efforts. The Water Quality Act of 1987 

amended the Clean Water Act1

 and created the CWSRF program to provide 

an independent, permanent, low-cost source of financing for a wide range 

of efforts to protect or improve water quality. Through the CWSRF, EPA 

provides annual grants to the states to capitalize state-level CWSRFs. 

States must match these EPA grants with a minimum of 20 percent of their 

own contributions. States loan their CWSRF dollars to local governments 

and other entities for various water quality projects, and loan repayments 

are cycled back into the state-level programs to fund additional projects. 

According to the EPA, all 50 states and Puerto Rico currently maintain 

revolving loan funds that have provided an average of over $4 billion in 

total annual assistance since 2000.2

 From fiscal years 1987 through 2005, 

state CWSRFs have provided over $52 billion and made over 16,000 loans 

for a variety of water quality projects.

The CWSRF provides states with significant flexibility to design programs 

to meet their water quality needs. States may use their CWSRF resources 

 1

The Federal Water Pollution Control Act Amendments of 1972 are commonly referred to

as the Clean Water Act. 

2

The District of Columbia does not participate in the Clean Water State Revolving Fund 

program.

Page 1 GAO-06-579 Wastewater Infrastructure 
to (1) construct or improve conventional wastewater infrastructure, such

as treatment plants and sewer systems; (2) control diffuse, or “nonpoint” 

sources of pollution, such as runoff from agricultural activities and leaking 

septic systems; and (3) develop or implement management plans in 

federally-designated estuaries. Although the CWSRF is primarily a lowinterest loan program, states can also use it to refinance, purchase, or 

guarantee local debt and purchase bond insurance. States may customize 

their loan terms, including interest rates (from 0 percent to market rates) 

and repayment periods (up to 20 years), depending on the financial and 

environmental needs of potential borrowers. EPA provides a range of 

financial and programmatic training and direct technical support to the 

states through its regional offices. 

Citing the states’ flexibility in determining how to use their CWSRFs, you 

asked that we examine (1) the extent to which states are currently using 

their CWSRF dollars to support conventional wastewater treatment 

infrastructure versus other qualifying expenses, (2) the strategies states 

use to allocate their CWSRFs among qualifying expenses, and (3) the 

measures states use to ensure that their allocation strategies result in the 

most efficient and effective use of their CWSRFs. 

To determine the extent to which states are currently using their CWSRFs 

to support conventional wastewater infrastructure versus other qualifying

expenses, we reviewed EPA’s National Information Management System, 

the database EPA uses to track expenditures for all 51 CWSRF programs. 

To examine the strategies states use to allocate their CWSRFs among 

qualifying expenses, we interviewed EPA and state-level agency officials 

and reviewed annual reports and other official documents. We conducted

field visits to a diverse group of states—including Delaware, Minnesota, 

Montana, North Carolina, Ohio, Texas, and Washington—to obtain 

detailed illustrative information about CWSRF allocation strategies from 

state-level CWSRF program officials and selected recipients of CWSRF 

funds. To gather information on additional states, we conducted 

structured phone interviews with EPA officials from all 10 regional offices 

and followed up with selected state-level CWSRF program officials to 

discuss allocation strategies and other aspects of their programs. We also 

reviewed each state’s most recent CWSRF Program Evaluation Report 

(PER), which EPA conducts annually. To examine how states ensure that 

their allocation strategies result in the most efficient and effective use of 

CWSRF dollars, we interviewed EPA and state officials about the financial

and environmental measures they use to assess CWSRF performance. In 

addition, we reviewed EPA’s online CWSRF Environmental Benefits 

Reporting System. We conducted our work between July 2005 and April 

Page 2 GAO-06-579 Wastewater Infrastructure 
2006 in accordance with generally accepted government auditing 

standards. See appendix I for a more detailed discussion of our scope and 

methodology. 

Since the inception of the CWSRF program in 1987, states have allocated

about 96 percent, or about $50 billion, of their CWSRF dollars to building, 

upgrading, or enlarging conventional wastewater treatment facilities and 

their associated conveyances. Projects to build or improve wastewater 

treatment plants alone account for over 60 percent of this amount, with 

the remainder supporting the construction or rehabilitation of sewer and 

storm water collection systems. In addition to these more conventional 

expenditures, 37 states report using some portion of their CWSRFs to 

address nonpoint source pollution, which sometimes account for serious 

pollution problems. Nonpoint source projects account for only 4 percent 

of CWSRF expenditures (about $2 billion) but represent more than 25 

percent of all CWSRF projects financed. Among all categories of CWSRFeligible nonpoint source projects, states provided the greatest level of

support—about 39 percent of all nonpoint source dollars—to activities 

related to sanitary landfills. Nationwide, 23 percent of CWSRF funds, or 64 

percent of all CWSRF loan agreements, were targeted for water quality 

projects in communities of less than 10,000 people. A number of states, 

such as North Carolina, Pennsylvania, and West Virginia, have developed 

special initiatives or customized their loan terms to help small or 

economically disadvantaged communities develop needed wastewater 

infrastructure. 

Results in Brief 

As allowed by the Clean Water Act, states have used considerable 

flexibility in designing their CWSRF programs to meet their individual 

clean water needs. In particular, states choose the extent to which they 

will use CWSRF funds to support point source control projects (e.g., 

wastewater treatment plant construction) and nonpoint source projects 

(e.g., implementing agricultural best management practices or replacing 

failing septic systems). The state of Washington, for example, uses up to 

20 percent of its CWSRF dollars for a set-aside to support nonpoint source 

projects and estuary conservation and management projects, while 

Alabama state law defines only traditional public wastewater treatment 

facilities as appropriate projects under its CWSRF program. Just as some 

states allocate CWSRF resources based upon identified water quality 

needs, other states have designed their programs to target selected types 

of borrowers. For example, Pennsylvania has targeted borrowers in small 

or rural communities during the allocation process, with 90 percent of all 

CWSRF loan agreements and almost 75 percent of total funding is directed

Page 3 GAO-06-579 Wastewater Infrastructure 
to projects in small communities. Similarly, Ohio offers CWSRF loans with 

(1) a 0 percent interest rate to communities with populations of less than 

2,500 and a median household income of less than $45,000 and (2) a 1 

percent interest rate to those with populations between 2,500 and 10,000 

and a median household income of less than $38,000. According to EPA 

and state officials, states’ allocation rationales may change as certain 

states’ priorities and clean water needs shift. Specifically, states may alter 

their allocation strategies in response to (1) aging wastewater 

infrastructure needing rehabilitation or replacement; (2) population 

growth and redistribution; (3) changes in EPA enforcement priorities, 

particularly with regard to limiting sewage discharges during wet weather 

conditions; (4) pressure to implement EPA’s Total Maximum Daily Load 

(TMDL) program; and (5) stricter EPA and state water quality standards 

for temperature, nutrients, and sediments. 

States use a specific set of financial and environmental measures to help 

determine efficient and effective use of CWSRF resources. Financial 

measures include a set of national financial indicators, such as return on 

federal investment, the pace at which available funds are loaned, and 

sustainability of the CWSRF. EPA regional officials conduct annual 

reviews of each state program to help ensure the fiscal integrity of the 

state programs. CWSRFs are also subject to annual independent financial 

audits. To measure environmental outcomes of CWSRF-supported 

projects, in fiscal year 2005, EPA developed an electronic benefits 

reporting system, which all states have agreed to use. Currently, the 

system collects data on anticipated environmental benefits associated with 

all types of CWSRF projects. It does not require any environmental 

monitoring, since the information input focuses on anticipated 

environmental benefits. However, some states are attempting to gather 

data on actual environmental benefits from their CWSRF-supported 

projects, including nonpoint source projects. Washington State, for 

example, recently required applicants to monitor the environmental 

impact of its CWSRF projects 3 to 5 years after project completion. 

Local governments have primary responsibility for wastewater treatment, 

owning and operating more than 17,000 treatment plants and 24,000 

collection systems nationwide. Local ratepayers have long been relied 

upon to fund both construction costs and operating and maintenance 

costs associated with facilities serving their communities. However, the 

federal government has provided financial assistance for these wastewater 

treatment facilities since the enactment of the Water Pollution Control Act 

Amendments of 1956, which established the federal Construction Grants 

Background 

Page 4 GAO-06-579 Wastewater Infrastructure 
program. Through this program, the federal government provided grants 

directly to local governments for constructing treatment facilities but 

limited the federal contribution to the lesser of 30 percent of eligible 

construction costs or $250,000. The Federal Water Pollution Control Act 

Amendments of 1972, commonly known as the Clean Water Act, increased

the federal share of costs to 75 percent. According to the Congressional 

Budget Office, federal outlays for wastewater treatment grants rose 

tenfold during the 1970s, reaching a high of $8.4 billion in 1980. 

Subsequent amendments in 1981 and 1987 reduced and then phased out 

the construction grant program, replacing it with the CWSRF. Instead of 

providing grants directly to localities, the CWSRF provides federal grants 

to the states, which in turn provide loans to communities and other 

entities to finance wastewater treatment and other water quality projects.3

The 1987 law established a system in which the states would use the loan

repayments to finance future CWSRF loans, thereby allowing the state 

revolving funds to operate without sustained federal support. Congress 

authorized appropriations through 1994 but has continued to appropriate 

funds to the CWSRF each year since.

The transfer of federal funds to state-level CWSRFs begins when Congress 

appropriates funds annually to the EPA. EPA then allots capitalization 

grants to the individual states. The Clean Water Act also requires states to 

provide state funds to match 20 percent of the total federal CWSRF 

capitalization grants. To receive its allotment, a state must provide an

Intended Use Plan that lists potential projects to solve water quality 

problems and solicit public comments on that list. After completing the 

plan and receiving its capitalization grant, a state has up to 1 year to enter 

binding commitments (later converted into loan agreements) with 

potential borrowers to fund specific water quality projects. The majority of 

CWSRF borrowers are municipalities and other local units of government,

although in some states nonprofit organizations, businesses, farmers, 

 3

The CWSRF is one source among many federal and state programs that local governments 

can turn to for financial assistance with their water quality projects. Federal agencies—

such as the U.S. Department of Agriculture’s Rural Utility Service, the Department of

Housing and Urban Development, and the Department of Commerce’s Economic 

Development Administration—also provide grants and loans for the construction of 

wastewater and sewer systems. According to EPA, 40 states also have separate grant or 

loan programs that provide financial assistance for clean water projects. 

Page 5 GAO-06-579 Wastewater Infrastructure 
homeowners, and watershed groups are eligible to seek nonpoint source 

funding through the CWSRF.4

According to an EPA headquarters official, a single CWSRF loan may 

support multiple clean water projects.

5

 State CWSRF administrators set 

loan terms, interest rates, and repayment periods. Loan repayments are 

cycled back into the state-level fund and used for additional water quality 

projects. States also have the option of using CWSRF funds as collateral to

borrow in the public bond market to increase the pool of available funds, a 

process referred to as “leveraging.” Figure 1 illustrates the flow of funds 

through the CWSRF program. 

 4

EPA also provides grants for nonpoint source projects through its National Nonpoint 

Source program. 

5

EPA reports that since July 1, 1987, states have provided over 16,752 CWSRF loans to 

support 22,674 projects. 

Page 6 GAO-06-579 Wastewater Infrastructure 
Figure 1: Flow of Funds through the CWSRF Program

Source: EPA.

Federal capitalization 

grants provided by the 

EPA

Matching funds 

provided by each state 

(minimum of 20 percent 

of federal grant)

State CWSRF 

programs

Bond holders

provide 

additional 

fundinga

(optional)

Wastewater 

infrastructure 

projects

Nonpoint source 

pollution control 

projects

Estuary 

management 

projects

Bond proceeds

Loan repayments

Low-interest loans

Bond repayments

$ $

a

To date, 27 states have “leveraged” their federal capitalization grants and state matching funds to 

borrow additional money in the public bond market. Nationally, leveraged bonds comprise about 27 

percent of total CWSRF funds, while loan repayments comprise about 10 percent. 

States can use their CWSRF resources to construct or upgrade wastewater 

infrastructure, address nonpoint sources of pollution,6

 or develop or 

implement management plans in federally-designated estuaries. States use 

a state-developed, EPA-approved, ranking system to direct funds to the 

highest priority projects. The ranking system considers applicant 

communities’ current regulatory compliance status, imminent public and 

environmental health threats, and the relative importance of the affected 

 6

Nonpoint source pollution, unlike pollution from industrial and sewage treatment plants, 

flows into waterways from many diffuse sources. Nonpoint source pollution is caused by 

rainfall or snowmelt moving over and through the ground and transporting natural and 

human-made pollutants, finally depositing them into surface bodies of water and 

groundwater. 

Page 7 GAO-06-579 Wastewater Infrastructure 
bodies of water. States are not required to fund these projects in priority 

order; decisions on which projects to fund first are often based on a 

project’s readiness to proceed. However, states must first use their 

CWSRFs to ensure that existing wastewater treatment facilities are in 

compliance with, or are making progress toward, deadlines, goals, and 

requirements of the Clean Water Act.7

 After meeting this “first use” 

requirement, states may use their CWSRFs to construct other wastewater 

infrastructure or for nonpoint source pollution and estuary management 

projects.8

Taken together, states have loaned the majority of their CWSRF dollars —

96 percent or about $50 billion since 1987—to build, upgrade, or enlarge 

conventional wastewater treatment facilities and conveyances. Direct 

CWSRF support for nonpoint source activities represents only 4 percent of 

CWSRF dollars (about $2 billion), although it accounts for over a quarter 

of all CWSRF projects financed. Nationwide, 23 percent of CWSRF funds 

(64 percent of all CWSRF loan agreements) were devoted to water quality 

projects in communities with populations of less than 10,000 people. 

States Have Loaned 

96 Percent of Their 

CWSRF Funds for 

Wastewater 

Infrastructure, with 23 

Percent Supporting 

Projects in Small 

Communities 

States Have Used about 96 

Percent of Their CWSRFs 

to Support Conventional 

Wastewater Infrastructure 

Projects 

All 51 CWSRF programs use the large majority of their CWSRF resources 

for conventional wastewater infrastructure projects. From fiscal year 1987

through June 2005, the Clean Water State Revolving Fund program has 

provided over $52 billion dollars in financial assistance to local 

governments and others for a variety of water quality improvement 

projects across the nation. States provided about 96 percent of this 

amount—or $50 billion—to municipalities to build, upgrade, or enlarge 

conventional wastewater treatment facilities and conveyances. EPA 

reports that conventional wastewater infrastructure projects account for 

about 73 percent of all CWSRF-funded projects. By their nature, 

 7

According to EPA headquarters officials, all 51 CWSRF programs met this “first use” 

requirement in the early 1990s. As such, these officials indicate that this requirement no 

longer affects states’ funding decisions. 

8

According to EPA, as of June 30, 2005, no state has reported using the estuary 

management category of qualifying expenses, but a few states have reported that a portion

of their wastewater treatment and nonpoint source assistance also supports activities to 

develop or implement management plans in federally designated estuaries. 

Page 8 GAO-06-579 Wastewater Infrastructure 
wastewater infrastructure projects are typically much more expensive to 

complete than nonpoint source projects. Figure 2 illustrates the relative 

funding for the types of projects receiving CWSRF assistance. 

Figure 2: CWSRF Support and Type of CWSRF-Supported Projects, Fiscal Years 1987 through 2005 

Source: EPA.

96%

27%

73%

4%

Percentage of total CWSRF dollar supporta Percentage of projects receiving CWSRFb

Nonpoint source

projects

($2 billion)

Wastewater 

treatment projects

($50 billion)

Nonpoint source

projects

Wastewater 

treatment projects

Note: According to EPA, as of June 30, 2005, no state has reported using CWSRF resources to 

directly support projects that are exclusively fundable under the estuary management category of 

qualifying expense (such as fish restocking). 

a

Total CWSRF funding equals $52.7 billion. According to EPA, $600 million of available CWSRF 

resources support short-term planning and design activities and, as such, have not yet been allocated

by the states among the qualifying categories of expense. However, EPA expects that these funds 

will be allocated (most likely to wastewater infrastructure projects) when rolled into longer-term 

construction projects. 

b

According to EPA, states have reported that their CWSRF loans have supported a minimum of 

22,674 projects, but because states do not use common standards to report the numbers of projects 

supported by loan agreements, the percentage of projects that are point source versus the 

percentage that are nonpoint source are imprecise, and the actual percentages might be either higher 

or lower than reported above. However, we were unable to quantify the extent of this imprecision. 

Within the conventional wastewater treatment category, states may 

allocate their CWSRF resources among the following seven major 

categories of projects: 

• Secondary Treatment includes infrastructure designed to ensure that 

wastewater treatment plant effluent meets EPA’s secondary treatment 

standards, a requirement of all new and existing wastewater treatment 

facilities. 

Page 9 GAO-06-579 Wastewater Infrastructure 
• Advanced Treatment includes infrastructure designed to further remove 

nutrients and other matter from wastewater treatment plant effluent 

beyond secondary treatment standards. 

• New Sewers includes the construction of new wastewater conveyances—

such as collector and interceptor sewers—to carry household and 

industrial wastewater to treatment facilities.9

• Sanitary Sewer Overflow correction includes efforts to prevent the 

occasional or incidental discharge of untreated sewage from municipal 

sanitary sewer systems that can occur due to inclement weather and 

improper maintenance or operation of sewer systems.10

• Combined Sewer Overflow correction includes efforts to prevent or 

mitigate discharges of untreated wastewater from combined sewer 

systems, which are designed to collect rainwater runoff, domestic sewage, 

and industrial wastewater in the same pipe. Combined sewer systems 

were designed in many cities to occasionally discharge excess wastewater

directly to nearby water bodies. However such overflows often pose 

significant public health and pollution problems and have become a 

national enforcement priority for EPA. 

• Storm Water Sewers includes both storm water infrastructure and efforts

to plan and implement municipal storm water management programs. 

• Recycled Water Distribution includes projects to convey recycled water 

(i.e., treated wastewater) from treatment facilities to end users such as 

golf courses and municipal gray water systems. 

 9

In order to estimate the amount of CWSRF support for the New Sewers category, EPA 

collects data on CWSRF support in two additional CWSRF expenditure categories—

Collector Sewers and Interceptor Sewers. Collector Sewers use pipes to consolidate and

transfer wastewater from sanitary or industrial wastewater sources to an interceptor

sewer, which then carries the wastewater to a treatment facility. Interceptor Sewer 

projects include major sewer lines that receive wastewater from collection sewers and 

carry the wastewater to a treatment facility or another interceptor sewer. 

10In order to estimate the amount of CWSRF support for Sanitary Sewer Overflow

correction, EPA collects data on CWSRF support in two additional CWSRF expenditure 

categories—Infiltration/Inflow correction and Replacement/Rehabilitation of Sewers. 

Infiltration/Inflow correction includes projects to control water penetration into sewer 

systems through defective pipes, manholes, drains, and storm sewers. 

Replacement/Rehabilitation of Sewers includes projects to reinforce or rebuild structurally 

deteriorating sewers. 

Page 10 GAO-06-579 Wastewater Infrastructure 
As shown in figure 3, nationwide, states have allocated about 60 percent of

their CWSRF wastewater infrastructure dollars for secondary and 

advanced treatment projects at wastewater treatment facilities. The 

remainder supports sewers and other conveyances. 

Figure 3: CWSRF Financial Assistance by Subcategory of Wastewater 

Infrastructure Projects, Fiscal Years 1987 through 2005 

Note: Percentages may not add to 100 due to rounding. 

a

Storm Water Sewers and Recycled Water Distribution together add to less than one-half of 1 percent 

of CWSRF assistance for wastewater infrastructure. 

Since the CWSRF’s inception, the total dollar amounts that states annually 

provide for wastewater infrastructure and nonpoint source projects has 

increased. However, CWSRF support for wastewater infrastructure has 

increased at a greater pace than the amount for nonpoint source projects. 

Figure 4 shows that states have used their CWSRFs to finance wastewater 

Source: EPA’s National Information Management System.

18%

<1%

9%

10%

20%

42%

Othera

Advanced Treatment

Sanitary Sewer Overflow

Combined Sewer Overflow

Secondary Treatment

New Sewers

Page 11 GAO-06-579 Wastewater Infrastructure 
infrastructure projects since 1987 but only began to use them to support 

nonpoint source projects in 1990. The annual percentage of the CWSRFs 

states allocated to nonpoint source projects peaked in 1996 at about 10 

percent. 

Figure 4: CWSRF Support for Wastewater Infrastructure and Nonpoint Source 

Pollution Control Projects, Fiscal Years 1987 through 2005 

Direct CWSRF support for nonpoint source pollution control activities 

represents only 4 percent (about $2 billion) of CWSRFs allocated by the 

states but accounts for over 25 percent of all CWSRF-supported projects 

because nonpoint source projects are typically less expensive than 

wastewater infrastructure projects. The extent to which states have used

their CWSRFs to support nonpoint source projects varies. To date, 37 

states have reported using some portion of their CWSRF funds to directly 

support nonpoint source projects. Among them, Wyoming has allocated 

the greatest percentage of funds to nonpoint source projects (44 percent), 

while New York has allocated the greatest dollar amount (over $700 

million). Figure 5 illustrates the percentage of funding that all 51 programs

have allocated to nonpoint source projects since the CWSRF’s inception. 

Detailed state by state figures are provided in appendix II. 

0

1

2

3

4

5

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Dollars in billions

Source: EPA’s National Information Management System.

Year

Wastewater treatment assistance

Nonpoint source assistance

Nonpoint Source Projects 

Represent 4 Percent of 

CWSRFs but Account for 

Over 25 Percent of All 

CWSRF-Supported 

Projects 

Page 12 GAO-06-579 Wastewater Infrastructure 
Figure 5: CWSRF Support for Nonpoint Source Projects as a Percentage of Total CWSRF Support, Fiscal Years 1987 through 

2005 

Color Percentage Number of states

White 0 

Light gray 0.1 - 4.9

Dark gray 5 - 9.9

Black 10 or greater

Source: EPA.

4

13

20

14

Page 13 GAO-06-579 Wastewater Infrastructure 
To be eligible for CWSRF support, a nonpoint source pollution control 

project must help implement a state’s EPA-approved Nonpoint Source 

Pollution Management Plan.11 Each state determines which nonpoint 

source pollution control activities are eligible for funding. Nationally, there 

are 11 major categories of nonpoint source pollution control projects that

have received CWSRF support: 

• Agricultural Best Management Practices include projects to reduce water

pollution resulting from activities related to the production of animals and

food crops.12 Projects can include nutrient management practices for the 

storage and disposal of animal waste; techniques to minimize pollution 

related to agricultural activities such as grazing, composting, pesticide 

spraying, planting, harvesting, fertilizing, and tillage; and irrigation water 

management. 

• Individual/Decentralized Sewage Treatment encompasses the 

rehabilitation or replacement of individual septic tanks or community 

sewage disposal systems. This category also includes the construction of 

collector sewers to transport waste from individual septic systems to a 

cluster septic tank or other decentralized facility.

• Groundwater-Unknown Source relates to the protection of groundwater 

and includes projects to protect wellheads and prevent contamination in 

areas where groundwater is replenished. 

• Storage Tanks include tanks above or below ground designed to hold 

petroleum products or chemicals. Projects may include spill containment

systems; the upgrade, rehabilitation, or removal of leaking tanks; and the 

treatment of contaminated soils and groundwater. 

• Sanitary Landfills manages water pollution emanating from landfills and 

includes activities such as collection of leachate or on-site treatment, 

capping, and closure. 

 11Under the Clean Water Act, states are required to develop a Nonpoint Source Pollution 

Management Plan that serves as a comprehensive guide to each state’s nonpoint source 

problems, pollution control programs, and future steps for nonpoint source pollution

control and prevention. 

12EPA tracks CWSRF expenditure data separately for nonpoint source projects related to

animal production and agricultural cropland but has reported these data together as

Agricultural Best Management Practices. 

Page 14 GAO-06-579 Wastewater Infrastructure 
• Silviculture includes best management practices related to forestry 

activities such as timber harvesting, removal of streamside vegetation, 

road construction, and mechanical preparation for the planting of trees. 

Eligible activities include preharvest planning, streamside buffers, road 

management, and re-vegetation of disturbed areas. 

• Marina includes water pollution control activities related to boating and

freshwater marinas. Pump-out systems, oil containment booms, and 

efforts to minimize discharge of sewage from boats are included in this 

category. 

• Resource Extraction includes pollution control activities related to mining 

and quarrying. Projects supported can include the construction of 

detention berms and the revegetation of areas affected by mining 

activities. 

• Brownfields include abandoned, idle, and underused industrial sites. 

Eligible projects include groundwater monitoring wells, treatment of 

contaminated soils and groundwater, capping of contaminated areas to 

prevent storm water infiltration, and removal of storage tanks at 

brownfields. 

• Hydromodification relates to the water channel modification, dam 

construction, stream bank and shoreline erosion, and wetland or riparian 

area protection or restoration. Examples of eligible activities include 

conservation easements; shore erosion control; wetland development and 

restoration; installation of open, vegetated drainage channels designed to

detain and/or treat storm water; and bank and channel stabilization. 

• Urban includes activities related to erosion, sedimentation, and discharge 

of pollutants (e.g., oil, grease, road salt, toxic chemicals) from 

construction sites, roads, bridges, and parking lots. 

As shown in figure 6, states have provided the greatest level of nonpoint 

source support—almost 40 percent of all CWSRF nonpoint source 

dollars—to mitigate contaminated runoff from sanitary landfills. 

Page 15 GAO-06-579 Wastewater Infrastructure 
Figure 6: CWSRF Support by Subcategory of Nonpoint Source Projects, Fiscal 

Years 1987 through 2005 

Note: Percentages may not add to 100 due to rounding. 

a

Taken together, the Silviculture, Marina, Resource Extraction, and Brownfields categories account 

for about 2 percent of CWSRF nonpoint source dollars. 

Although sanitary landfill projects received the largest share of CWSRF 

nonpoint source dollars, EPA reports that agricultural best management 

practices account for over 55 percent of all CWSRF-supported nonpoint 

source projects receiving CWSRF support. Agricultural best management 

practices—such as constructing a manure retention pond to control 

pollution created by contaminated storm water runoff—are typically less 

expensive than other types of nonpoint source projects. EPA also reports 

that the construction or repair of decentralized or individualized 

wastewater treatment systems (i.e., septic systems) accounted for about 

another one-third of all CWSRF-supported nonpoint source projects. 

Twelve states have reported to EPA that they have indirectly addressed 

nonpoint sources of pollution with projects categorized under wastewater 

treatment infrastructure. This may occur, for example, when a state 

Source: EPA’s National Information Management System.

11%

2%

4%

8%

9%

15%

39%

Othera

Hydromodification

Storage Tanks

Individual/Decentralized 

Sewage Treatment

Sanitary Landfills

13%

Agricultural Best Management Practices

Urban

Groundwater-Unknown Source

Page 16 GAO-06-579 Wastewater Infrastructure 
provides a loan to build a centralized collection system or wastewater 

treatment plant to replace failing individual septic systems, which EPA 

and the states define as a nonpoint source of water pollution. Because the 

solution to the nonpoint source pollution problem is technically a 

wastewater treatment facility, EPA considers the expenditure to be in the 

wastewater infrastructure category. As detailed in table 1, these 12 states

have devoted at least $650 million of their collective financing for 

wastewater infrastructure projects to address nonpoint sources of 

pollution. 

Table 1: States Voluntarily Reporting Use of CWSRFs to Address Nonpoint Sources 

of Water Pollution with a Wastewater Treatment System, Fiscal Years 1987 through 

2005 

Dollars in millions 

State 

Amount of wastewater assistance used to

 address nonpoint sources of pollution 

Arizona $140.6 

Delaware 59.3 

Indiana 39.6 

Kansas 4.9 

Massachusetts 12.2

Minnesota 104.9

New Mexico 0.6 

New York 81.3 

North Carolina 18.0 

Oregon 35.5 

Rhode Island 150.8 

South Carolina 7.1 

Total $654.7 

Source: EPA’s National Information Management System. 

Note: Numbers may not add to total due to rounding. 

Page 17 GAO-06-579 Wastewater Infrastructure 
Figure 7 shows that since the inception of the CWSRF program, small 

communities—defined by EPA as having less than 10,000 inhabitants—

have received about 23 percent of total CWSRF dollars.13 In contrast, over 

60 percent of all CWSRF loan agreements supported projects within these 

smaller communities. 

Smaller Communities 

Account for 23 Percent of 

CWSRF Dollars Loaned, 

but Over 60 Percent of All 

CWSRF-Supported 

Projects 

Figure 7: CWSRF Support by Community Size as a Percentage of Total CWSRF Support, Fiscal Years 1987 through 2005 

Source: EPA’s National Information Management System.

34%

48%

11%

26%

11%

12%

43%

Less than 3,500

10,000 to 99,999

3,500 to 9,999

100,000 and above

16%

3,500 to 9,999

10,000 to 99,999

Less than 3,500

100,000 and above

Percentage of total CWSRF support Percentage of CWSRF loan agreements

Note: Percentages may not add to 100 due to rounding. EPA reports that, as of June 30, 2005, total 

CWSRF financial assistance equals $52.7 billion and that the total number of CWSRF loan 

agreements equals 16,752. EPA does not collect data on the types of individual projects (e.g., 

wastewater infrastructure or nonpoint source) or type of loan agreement that each community 

receives. 

Figure 8 shows the considerable degree to which the states vary in the 

extent to which their CWSRFs support small communities. It illustrates, 

for example, that just over half of the CWSRF programs have provided 30 

percent or more of their CWSRF funds for projects in small communities. 

Pennsylvania has provided the greatest dollar amount ($914 million), as 

 13This compares with U.S. Census figures showing that 41 percent of the U.S. population 

lives in areas with fewer than 10,000 people. 

Page 18 GAO-06-579 Wastewater Infrastructure 
well as a high percentage of loans (90 percent) to projects in small 

communities. At the other end of the spectrum, California has provided 

the lowest CWSRF dollar amount (4 percent) and loans (15 percent) for 

projects in small communities. 

Figure 8: CWSRF Support to Small Communities as a Percentage of Total CWSRF Support, Fiscal Years 1987 through 2005 

Color Percentage Number of states

White 0 - 14.9

Light gray 15 - 29.9 

Dark gray 30 - 44.9

Black 45 or greater 15

11

20

5

Source: EPA.

Page 19 GAO-06-579 Wastewater Infrastructure 
Our interviews with state and EPA officials suggest that the diversity 

states exhibit in their CWSRF spending reflects the variation in what they 

see as their most pressing water quality infrastructure needs, their most 

pressing water quality problems, and the degree to which they rely on 

CWSRF funds to protect smaller communities. EPA and state officials 

predict that, in future years, states are likely to alter their current CWSRF 

allocation strategies in response to growing demand and shifting clean 

water needs and priorities. 

States’ Allocation 

Strategies Reflect 

Diverse Clean Water 

Needs and CWSRF 

Program Goals 

Some States Focus on 

Conventional Wastewater 

Problems 

Some states have focused their CWSRFs on supporting the construction of 

wastewater treatment plants and conveyance systems. According to EPA 

officials, these states consider wastewater infrastructure needs their 

highest CWSRF priority and seek other sources of funding to support 

nonpoint source pollution problems and estuary management activities. In

some cases, state legislation restricts the use of CWSRFs for nonpoint 

source projects. For example, the legislation that created Alabama’s 

CWSRF limits the scope of the program by defining projects that receive 

CWSRF funds as traditional public wastewater facilities. Other states have 

passed legislation restricting the types of entities that can receive CWSRF

loans. Nevada and Colorado, for example, have limited their CWSRF 

borrowers to local municipalities or similar government entities, thereby 

excluding private or nongovernmental entities from receiving CWSRF 

funds. 

Even where state law allows CWSRF funds to be used for nonpoint source 

projects, some state CWSRF administrators have told EPA officials that 

they are not comfortable with using CWSRF funds for this purpose, 

especially when demand for funding for wastewater infrastructure 

projects in their states is high. For example, according to officials in EPA’s 

New York Regional Office, large parts of Puerto Rico lack basic sewers 

and wastewater treatment facilities. Consequently, Puerto Rico’s CWSRF 

has focused on these needs. Similarly, according to officials in EPA’s 

Kansas City Regional Office, Kansas has focused on wastewater treatment 

projects due to high levels of borrower demand for support for these types 

of projects. 

Some states that are willing and legally able to fund both wastewater 

infrastructure and nonpoint source projects have not done so because of 

low borrower demand for nonpoint source projects. Officials in EPA’s 

Dallas and Atlanta Regional Offices told us that Louisiana, Kentucky, and 

New Mexico are willing to fund nonpoint source projects but have not

done so because of a lack of borrower demand. Similarly, North Carolina 

Page 20 GAO-06-579 Wastewater Infrastructure 
and Texas CWSRF officials explained that groups that typically implement 

nonpoint source projects often pursue grant money for their projects from 

federal, state, or private sources rather than CWSRF loans. CWSRF 

officials in states we visited indicated that nonpoint source borrowers are 

often reluctant to accept a CWSRF loan because they lack a dedicated

source of revenue to repay it. While wastewater treatment plants can 

depend on user rates for loan repayments, nonpoint source borrowers may 

not have a readily available or dedicated source of revenue to repay a loan. 

As such, these officials suggest that the availability of grants through other 

federal- or state-funded programs may affect the level of demand for 

CWSRF loans for nonpoint source projects. 

Most States Report Using 

Some of Their CWSRFs to 

Support Nonpoint Source 

Projects 

As of June 2005, 37 states reported using some portion of their CWSRF 

funds to support nonpoint source projects, up from only 2 states in 1990.

The considerable progress in restoring the nation’s waterways since the 

passage of the Clean Water Act is largely attributable to significant efforts 

to reduce pollutant levels from point sources of pollution, which are those 

that contribute pollutants directly to a body of water from a pipe or other 

conveyance. However, EPA reports that one-third of the nation’s assessed 

waters still do not meet water quality standards. Recognizing the 

considerable role of nonpoint source pollution in these standards 

violations, the majority of states have decided to focus at least some 

attention on addressing these problems with their CWSRF resources. 

EPA has encouraged all states to use a watershed management approach 

to solving water quality problems, which according to state and EPA 

officials, has increased the number of states addressing nonpoint source 

pollution with their CWSRFs.14 While traditional water quality programs 

have focused on specific sources of pollution, such as sewage discharges, 

or on specific water resources, such as a river segment or a wetland, a 

watershed management approach addresses water quality problems at the 

watershed level. According to officials at EPA headquarters and several 

regional offices, this approach to water quality management often 

highlights the role of nonpoint source pollution in noncompliance issues. 

These officials suggested that states using a watershed management 

approach are more likely to fund nonpoint source projects with CWSRF 

resources. Additionally, CWSRF officials in Ohio and Minnesota told us 

that developments in water quality monitoring technologies and expansion 

 14A watershed is the land area that drains water into a river system or other body of water. 

Page 21 GAO-06-579 Wastewater Infrastructure 
of monitoring efforts have helped their states better identify nonpoint 

sources of pollution. According to these officials, the role of nonpoint 

source pollution in noncompliance has been “uncovered” over the years as 

they have improved monitoring efforts and as point sources of pollution—

such as wastewater treatment facilities—are brought into compliance. 

Some states have been highly proactive in encouraging use of CWSRF 

funds to support nonpoint source projects. For example, in an effort to 

ensure that CWSRFs address nonpoint source problems, some states have 

passed legislation setting aside a portion of their CWSRFs to be used 

exclusively for nonpoint source projects. For example, Washington state 

regulations require that CWSRF administrators reserve up to 20 percent of 

available funds for nonpoint source pollution control and comprehensive 

estuary conservation and management projects. 

Other states have developed innovative lending approaches to overcome 

some of the barriers to funding nonpoint source projects with CWSRF 

resources. To increase the number of nonpoint source borrowers while 

minimizing loan transaction costs, some states pass CWSRF loan risks and 

loan servicing responsibilities onto third parties. These states have 

established pass-through lending or linked-deposit programs, whereby 

loans are passed through state agencies, municipalities, or local banks 

before reaching the borrower. Minnesota’s CWSRF program, for example, 

works with the Minnesota Department of Agriculture to allocate a portion

of its funds to counties, soil and water conservation districts, and others to

help establish minirevolving loan accounts. These local units of 

government work with local financial institutions to provide low interest 

loans for projects proposed by farmers, rural landowners, and agriculture

supply businesses for projects to implement, among other things, 

agricultural best management practices. The local units of government 

approve eligible projects and refer borrowers to the local financial 

institutions. Using CWSRF funds from the minirevolving loan account, the 

bank provides low-interest loans to qualified borrowers. The lending 

institution assumes the risk and management responsibility for the loan. 

Other states—such as Massachusetts and Missouri—have set up similar 

pass-through loan programs to address nonpoint sources of pollution with 

CWSRF funds. 

To overcome the challenge of finding a dedicated source of repayment for 

nonpoint source projects, Ohio’s Water Resource Restoration Sponsor 

Program integrates CWSRF support for nonpoint source projects into 

loans for wastewater treatment plants. According to Ohio CWSRF 

officials, communities seeking a CWSRF loan for a wastewater treatment 

Page 22 GAO-06-579 Wastewater Infrastructure 
facility can receive a discount to the interest payments that would 

otherwise be due on their wastewater project loans. After the wastewater 

facility loan has been awarded, the amount of the interest discount is 

advanced to the community, which then assumes responsibility for 

financing the implementation of the associated nonpoint source project. In 

return, the community receives a reduction to its wastewater facility loan’s 

interest rate of up to 0.2 percent. A community that participates in this 

program does not typically implement the nonpoint source project itself. 

Rather, it enters into an agreement with an implementing partner, such as

a land trust or a park district. Using the interest discount funds, this 

partner develops and implements a nonpoint source project (such as a 

plan to restore and permanently protect a waterbody’s aquatic habitat 

resources) but does not repay the CWSRF. Instead, the sponsoring 

community covers the cost as part if its repayment of its wastewater 

facility loan. 

According to Ohio officials, the benefit of the state’s program is that water 

restoration projects that may not normally receive CWSRF funding are 

completed with the help of the wastewater treatment plants. Based in part 

on the program’s success, Ohio officials have decided to set aside $15 

million of CWSRF resources each year for their Water Resource 

Restoration Sponsor Program. A few other states are in the process of 

establishing similar sponsorship programs. 

Some States Target 

Borrowers in Small or 

Economically 

Disadvantaged 

Communities 

Just as states vary in the way they allocate CWSRF resources according to

water quality needs, they also vary in the extent to which they target 

borrowers in small or economically disadvantaged communities. Smaller 

communities may struggle more to raise capital for water quality 

infrastructure than larger communities with broader tax and rate bases. In 

1992, Congress directed EPA to establish a Small Town Environmental 

Planning Task Force to, among other things, advise EPA on how to work 

better with small communities. The task force found that technical and 

administrative capacity is often severely limited in small towns, which 

often lack full-time officials and professional staff. Moreover, the task 

force found that small communities tend to have severely limited tax bases 

and budgets and, therefore, may not have the necessary credit ratings to 

attract capital to finance their wastewater infrastructure. In addition, 

infrastructure costs fall disproportionately on small towns because entrylevel costs must be distributed over a smaller base. 

Recognizing these challenges, some states—such as Montana, 

Pennsylvania, and West Virginia—use their CWSRFs to help rural, lowPage 23 GAO-06-579 Wastewater Infrastructure 
income communities meet required sewage and water quality standards. In 

Pennsylvania, almost 90 percent of all CWSRF loan agreements and 75 

percent of total funding is directed to projects in small communities. 

Several states have set aside a portion of their funds for CWSRF-funded 

projects in small or economically disadvantaged communities. For 

example, Oregon reserves up to 15 percent of its CWSRF to support 

projects in communities with populations of 5,000 or less that are facing

severe water quality problems. According to EPA and state officials, some 

CWSRF programs have rules to protect the ability of small communities to 

access CWSRF funds. For example, some states such as New York and 

Minnesota have placed limits on the amount of CWSRF support any one 

borrower—such as a major metropolitan area—can receive in a given 

year. 

A number of states offer small or economically disadvantaged

communities special assistance when applying for CWSRF loans. For 

example, Ohio offers CWSRF loans with (1) a zero percent interest rate to 

communities with populations of less than 2,500 and a median household

income of less than $45,000 and (2) a 1 percent interest rate to those with 

populations between 2,500 and 10,000 and a median household income of 

less than $38,000. West Virginia CWSRF administrators are able to extend

repayment terms up to 40 years to qualified disadvantaged communities to 

help make projects more affordable. Kentucky offers special state-funded,

short-term loans to small communities to help them cover expenses 

related to obtaining a CWSRF loan. Montana has developed special 

outreach and technical assistance programs to help small communities 

take advantage of the CWSRF program. Montana officials explained that

many small communities lack the necessary administrative structures to 

receive a CWSRF loan or lack the technical expertise to develop 

competitive applications for CWSRF loans. The state has contracted with 

the Rural Community Assistance Partnership, a nonprofit organization, to

provide technical assistance to rural and small communities to guide them

through the process of developing a competitive application and set up the 

necessary administrative structures to receive a CWSRF loan. Officials in 

several small Montana communities told us that, without this technical 

assistance, they would not have been able to receive the CWSRF loans that

were critical to the financing of their wastewater infrastructure. 

Future State Allocation 

Strategies Will Likely 

Reflect Shifting Priorities 

According to the EPA and state officials we interviewed, demand for 

CWSRF support for both point and nonpoint source projects will grow 

considerably in the future, and states will likely alter their CWSRF 

allocation strategies in response to shifting clean water needs and 

Page 24 GAO-06-579 Wastewater Infrastructure 
priorities. Among the factors these officials cite in predicting changes in

states’ allocation strategies are (1) aging wastewater infrastructure 

needing rehabilitation or replacement; (2) population growth and 

redistribution; (3) changes in EPA enforcement priorities, particularly with 

regard to limiting sewage discharges during wet weather conditions; (4) 

pressure to implement EPA’s TMDL program; and (5) stricter EPA and 

state water quality standards for temperature, nutrients, and sediments. 

Officials in all 10 EPA regional offices and a number of state officials told

us that the need to repair or replace aging wastewater infrastructure will 

be a major driver of future demand for CWSRF resources. These officials 

point out that many of the wastewater treatment plants and conveyances 

built with federal support in the early 1970s in response to the passage of 

the Clean Water Act are now reaching the end of their useful lives. EPA 

data indicate that wastewater treatment plants typically have an expected

useful life of 20 to 50 years before they require expansion or rehabilitation. 

Wastewater conveyances such as pipes and sewers have life cycles that 

can range from 15 to over 100 years. In addition, some wastewater systems 

on the East Coast still rely on pipes that are almost 200 years old. Taking 

into account the need to repair or replace these aging systems, a 2002 

Congressional Budget Office analysis estimated that between 2000 and 

2019, $260 to $418 billion will be needed for wastewater infrastructure, 

while current spending is approximately $10 billion per year.15 CBO’s 

analysis suggests that the gap between current and needed spending could 

be as high as $11 billion per year. 

In addition to repairing or replacing existing infrastructure, EPA officials 

predict that some states will face increased demand for new wastewater 

treatment systems in response to population growth. In addition to overall 

population growth, EPA also indicates that the existing U.S. population is 

shifting geographically, requiring rapid increases in wastewater treatment 

capacity in certain areas. EPA officials indicated that some states in the 

West—such as Utah and Nevada—and the South—such as Georgia and

Florida—are already experiencing rapid population growth and 

considerable pressure to expand existing treatment capacity. In addition, 

EPA officials point out that in the near-term, some states along the Gulf 

Coast will have to balance the need for new growth with demand to 

 15Congressional Budget Office, Future Investment in Drinking Water and Wastewater

Infrastructure (Washington, D.C.: May 2002). 

Page 25 GAO-06-579 Wastewater Infrastructure 
replace or repair wastewater infrastructure that was damaged by recent 

hurricanes. 

In response to recent EPA wet weather policies and enforcement actions, 

some state and EPA officials predict that a number of states will 

experience increased demand for CWSRF assistance to address combined 

sewer overflows (CSO), which are discharges of untreated wastewater 

from a combined sewer system. Combined sewer systems collect and 

transport both sanitary sewage and storm water runoff in a single-pipe 

system to a wastewater treatment facility. Constructed prior to the 1950s, 

combined sewer systems exist in primarily older, urban communities in 

the Northeast, Middle Atlantic, Midwest, and Northwest. An overflow 

typically occurs when the total wastewater and storm water flow exceeds 

the capacity of the system and, by design, discharges directly into a 

receiving water body. Pollutants in CSOs have been shown to be a major 

contributor to nonattainment of water quality standards and may pose 

significant public health and pollution threats. As such, EPA has selected 

these problems as national enforcement priorities. Sixty percent of the 

more than 9,000 combined sewer systems nationwide serve communities 

of fewer than 10,000 people—-the very communities that face some of the 

most difficulty in raising capital to address environmental infrastructure. 

States have already used almost $5 billion of CWSRF funds to correct 

CSOs, and EPA recently reported to Congress that an additional $50 billion 

is required nationwide. Officials in some Midwestern states—such as 

Michigan and Minnesota—predict that addressing CSOs will be one of the 

biggest drivers of demand and that funding these projects will become a 

higher priority in the future. According to officials in EPA’s Chicago and 

Atlanta Regional Offices, some states facing major CSO problems—such 

as Indiana and Kentucky—have indicated that the CWSRF will be a 

primary source of funding for their long-term CSO management plans. 

State and EPA officials also point out that demand for CWSRF support for 

nonpoint source pollution control projects is likely to grow as states begin 

projects to bring impaired waters into compliance with EPA’s TMDL 

program. A TMDL is a calculation of the total maximum amount of a 

pollutant that a body of water can receive each day and still meet water 

Page 26 GAO-06-579 Wastewater Infrastructure 
quality standards.16 Water quality standards are set by states, territories, 

and tribes and identify the uses for each body of water such as drinking 

water supply, contact recreation (swimming), and aquatic life support 

(fishing). States generally determine if a body of water is meeting 

standards by comparing monitoring data with applicable state water 

quality criteria. If the body of water fails to meet applicable federal, state,

or local water quality, then the state is required to list that water as 

impaired. EPA guidance provides that the state should then develop a 

TMDL implementation plan that specifies reductions necessary to achieve 

the standard and then eventually implement a cleanup plan. According to 

EPA guidance, the state implementation plan should specify which 

pollution sources will be restricted to meet water quality standards. State 

and EPA officials indicate that a majority of standards violations relate to

nonpoint sources of pollution and, subsequently, a number of TMDL 

projects address nonpoint sources of water pollution. For example, 

Minnesota CWSRF officials told us that they believe 86 percent of the 

pollution in their impaired waters emanates from nonpoint sources of 

pollution. According to some state and EPA officials, many states are 

considering the CWSRF as a major source of funding, given the amount of

resources and the overall costs of implementing the plans. 

In a similar vein, EPA and state officials also pointed out that stricter 

federal, state, and local water quality standards will continue to drive up 

demand for CWSRF loans for both point and nonpoint source projects. For 

example, according to officials in EPA’s Philadelphia Regional Office, 

stricter biological and nutrient standards in the recent Chesapeake Bay 

Agreement will drive demand for CWSRF loans in Mid-Atlantic states. 

Officials in Minnesota told us they are experiencing a surge in demand for 

CWSRF loans to repair or replace individual failing septic systems due to 

greater attention and more stringent enforcement by state and county 

regulators. EPA officials in EPA’s Seattle Regional Office point out that

efforts to protect the region’s endangered salmon and bull head trout 

through the Endangered Species Act may force wastewater treatment 

 16Water quality standards comprise two key components—designated uses and water

quality criteria. Designated uses are uses assigned to water bodies such as drinking water, 

contact recreation (e.g., swimming), and aquatic life support (e.g., fish populations). Water 

quality criteria specify pollutant limits that are intended to protect the designated uses of a

water body, such as the maximum allowable concentration of a pollutant (e.g., iron) or an 

important physical or biological characteristic that must be met (e.g., an allowable 

temperature range). Water quality criteria can be quantitative (“numeric”) or qualitative 

(“narrative”), and they can include components such as the frequency and duration of

monitoring needed to determine whether the criteria are being met. 

Page 27 GAO-06-579 Wastewater Infrastructure 
plants to upgrade their treatment efforts and local municipalities to 

address nonpoint sources of pollution. These officials predict that tougher 

temperature and sediment standards in waters receiving effluent will drive 

demand, especially for nonpoint source projects, in states such as 

Washington, Idaho, and Oregon. 

EPA and the states use a uniform set of financial and environmental 

measures to help determine efficient and effective use of CWSRF 

resources. EPA and state-level officials rely on three measures to assess 

financial performance, including a set of national financial indicators, an 

annual Program Evaluation Report conducted by the cognizant EPA 

regional office for each state CWSRF program, and an annual independent

financial audit of the state program. Efforts to measure the environmental 

benefits of states’ CWSRFs are relatively new and generally center on 

EPA’s recently developed electronic Environmental Benefits Reporting 

System. 

EPA and the States 

Use Specific Financial 

and Environmental 

Measures to Evaluate 

Efficient and 

Effective Use of 

CWSRF Resources 

EPA Uses Three Measures 

of States’ CWSRF 

Financial Performance to 

Ensure Efficient and 

Effective Use 

Since the CWSRF program’s inception, all states have used similar 

measures to evaluate CWSRF financial performance. The first measure, 

EPA’s National Financial Indicators, consists of five individual national 

financial indicators. According to an EPA headquarters official responsible 

for these indicators, the agency developed these indicators in conjunction 

with the states to provide a balanced approach to understanding the 

different objectives of CWSRF financial performance. According to a 

senior EPA headquarters official, CWSRF project-summary information, 

reported by the states in the National Information Management System, is 

used to calculate the indicators on a state by state and national level. The

indicators include the following: 

• Return on Federal Investment estimates how many dollars in

environmental investment have been generated for every federal dollar 

spent through the program. 

• Ratio of Executed Loans to Funds Available for Loans (often referred to 

as the “pace” at which loans are made) measures the cumulative dollar 

amount of executed loan agreements relative to the cumulative dollar 

amount of funds available for loans. It is one indicator of how quickly 

funds are made available to finance CWSRF eligible projects.

• Ratio of CWSRF Loan Disbursement to Executed Loans measures the 

speed at which projects are proceeding toward completion by comparing

Page 28 GAO-06-579 Wastewater Infrastructure 
the cumulative dollar amount of CWSRF loan disbursements with the 

cumulative dollar amount of executed loan agreements and expressing 

this as a percentage. 

• Estimated Additional CWSRF Loans Made Due to Leveraging estimates 

the dollar amount of additional projects that have been funded, that 

otherwise might not have been, had leveraged bonds not been issued. This 

is done by comparing the cumulative amount of CWSRF executed loans 

with the cumulative amount of funds available after subtracting the net 

funds provided by issuing bonds. 

• Sustainability of the Fund gauges how well the CWSRFs are maintaining

their invested or contributed capital, without making adjustments for loss 

of purchasing power due to inflation.

EPA’s second measure to evaluate effective and efficient use of CWSRF 

dollars is its annual review and accompanying written PERs conducted by

EPA’s regional offices of each state program. According to the EPA’s 

annual review guidance, the review is intended to, among other things (1) 

evaluate the success of the state’s performance in achieving goals and 

objectives identified in its Intended Use Plan (which identifies the 

intended uses of the amounts available to its CWSRF) and the state’s 

Annual Report (which describes how the state has met the goals and 

objectives of the previous fiscal year as identified by the Intended Use 

Plan), (2) determine how the CWSRF is achieving the intent of the Clean 

Water Act, (3) assess the financial status and performance of the fund, and

(4) evaluate progress in identifying the environmental and public health

benefits of the program. The review, based on the information collection

and evaluation process, ends with the issuance of the PER. 

EPA’s third measure is the annual financial audit. The Clean Water Act 

requires the 51 state-level CWSRF programs to undergo these audits to 

determine whether the CWSRF financial statements are presented fairly in

all material respects in conformity with Generally Accepted Accounting 

Principles (GAAP) and whether the state has complied with the laws, 

regulations, and the provisions of CWSRF capitalization grants.

17 The 

 17More specifically, the product of the audit is expected to include (1) financial statements 

with an opinion (or disclaimer of opinion) as to whether the CWSRF financial statements 

are presented fairly in all material respects in conformity with GAAP; (2) a report on

internal controls related to the CWSRF financial statements that describes the scope of

testing of internal controls and the results of tests; and (3) a report on compliance that 

includes an opinion as to whether the state has complied in all material respects with laws, 

regulations, and the provisions of the CWSRF capitalization grants. 

Page 29 GAO-06-579 Wastewater Infrastructure 
audit, conducted under the Single Audit Act, focuses on the state’s overall 

CWSRF program, rather than individual capitalization grants awarded to 

states by EPA. In addition, independent audits are conducted in 43 states 

by auditors contracted by the state; EPA’s Office of Inspector General 

currently conducts audits for the remaining eight programs.18

Quantifying an environmental program’s financial transactions is an 

inherently more straightforward exercise than quantifying its 

environmental benefits. Nonetheless, the EPA Office of Water’s 

Environmental Indicator Task Force has been developing environmental 

indicators for the CWSRF since at least 1991. This task force, comprised of 

federal and state officials, identified obstacles to measuring benefits and 

shared ideas for solutions. It attempted to develop key environmental 

indicators, such as the number of pounds of pollutants removed from 

wastewater treatment plant effluent. However, a number of obstacles 

prevented collection of comprehensive environmental benefits 

measurements—most notably (1) a lack of baseline environmental data

and (2) technical difficulties in attributing benefits specifically to the 

CWSRF. EPA headquarters officials also explained that environmental 

monitoring activities are not an allowable use of CWSRF funds, even as an 

administrative expense.19

Despite these complications, the requirements of the Government 

Performance and Results Act and EPA’s own Strategic Plan have long

recognized the need for outcome-based measures for the agency’s 

programs. Moreover, according to EPA headquarters officials, recent 

reviews by the Office of Management and Budget (OMB) and EPA’s Office 

of Inspector General provided further impetus to quantify environmental 

outcomes of the CWSRF. In particular, a 2004 EPA Office of Inspector 

General report criticized the program for not developing a comprehensive 

plan for measuring results and recommended that such a plan be 

developed. In a similar vein, OMB’s Program Assessment Rating Tool 

EPA and the States Have 

Recently Started Reporting 

Environmental Benefits of 

CWSRF-Funded Projects 

as a Measure of Efficient 

and Effective Use of 

Program Resources 

 18According to EPA headquarters officials, starting in fiscal year 2006, the EPA Inspector 

General will no longer perform audits for these eight CWSRF programs. Instead, EPA

headquarters officials will likely conduct these audits using a mission contractor. 

19According to EPA headquarters officials, environmental monitoring equipment associated 

with a CWSRF-funded project is an allowable CWSRF expense. 

Page 30 GAO-06-579 Wastewater Infrastructure 
(PART)20 review of the CWSRF cited its inability to link dollar 

expenditures with environmental improvements. 

In response, representatives of a state-EPA work group and of the 

Association of State and Interstate Water Pollution Control Administrators

(assisted by an EPA contractor) developed the Environmental Benefits 

Reporting System in July 2005. This system strives to capture anticipated 

environmental benefits that are expected to result from CWSRF-funded 

projects. The system does not require any environmental monitoring, 

focusing instead on anticipated environmental benefits. According to EPA 

headquarters officials, all 51 programs have agreed to use the system to 

report the environmental benefits of their CWSRF-funded projects and 

must report on all loans made from capitalization grants received after 

January 1, 2005. 

By July 2005, states were able to enter data about anticipated 

environmental improvements to bodies of water resulting from CWSRFfunded projects. Unlike the National Information Management System 

data, which is submitted by the states each year in the aggregate, the 

environmental benefits data is submitted on a per-project basis, at the time 

of loan execution. As of February 2006, 42 states have begun using it to 

report CWSRF-supported projects, including nonpoint source projects. 

Some states are attempting to go beyond EPA’s requirements by gathering

data on actual environmental benefits from their CWSRF-funded projects,

including nonpoint source projects. Washington State, for example, 

recently required applicants to monitor the environmental impact of all of

its CWSRF projects 3 to 5 years after project completion. Between 2001 

and 2003, Oklahoma conducted water quality monitoring on 19 receiving 

streams, both upstream and downstream of CWSRF-funded improvements 

to remove pollutants and increase dissolved oxygen in effluent entering 

the streams. However, the study could not determine the extent to which

these particular projects improved overall water quality in the streams, 

largely because baseline environmental data were unavailable. 

Other states are going beyond the minimal requirements of the EPA 

system by estimating the degree to which pollution is prevented by 

 20According to OMB, the PART was developed to assess and improve program performance

so that the federal government can achieve better results. A PART review helps identify a

program’s strengths and weaknesses to inform funding and management decisions aimed 

at making the program more effective. 

Page 31 GAO-06-579 Wastewater Infrastructure 
specific CWSRF-funded projects. Delaware CWSRF officials, for example,

explained that since 2000, they have used estimates of the amount of 

pollutants a proposed CWSRF project would remove from the waste 

stream to develop the state’s Project Priority List. As another example, 

according to EPA’s Seattle regional officials, Oregon has begun to award 

additional points to CWSRF project applicants (thus increasing the priority 

of the project) if they agree to conduct their own environmental 

monitoring and evaluation. 

As EPA and the states have long known, quantifying environmental 

programs’ benefits with any degree of precision is a challenging exercise.

Nonetheless, their efforts to do so regarding the CWSRF are particularly 

important, given the sizable investment of both federal and state dollars in

the program. 

EPA reviewed a draft of this report and provided technical comments, 

which have been fully incorporated.

As agreed with your offices, unless you publicly announce the contents of

this report earlier, we plan no further distribution of this report until 30 

days from the report date. At that time, we will send copies of this report 

to appropriate congressional committees; interested Members of 

Congress; the Administrator, Environmental Protection Agency; and other 

interested parties. We also will 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. 

Agency Comments 

and Our Evaluation 

Page 32 GAO-06-579 Wastewater Infrastructure 
Should you or your staff need further information, please contact me at 

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

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

of this report. GAO staff who made major contributions to this report are 

listed in appendix III. 

John B. Stephenson 

Director, Natural Resources and Environment 

Page 33 GAO-06-579 Wastewater Infrastructure 
Appendix I: Scope and Methodology 

Page 34 GAO-06-579 Wastewater Infrastructure 

Appendix I: Scope and Methodology 

GAO’s review focused on the following questions: 

• To what extent are states currently using their Clean Water State 

Revolving Funds (CWSRF) to support conventional wastewater treatment 

plant construction versus other qualifying expenses? 

• What strategies do states use to allocate their CWSRF dollars among 

qualifying expenses? 

• What measures do states use to ensure that their allocation strategies are 

resulting in the most efficient and effective use of their CWSRFs? 

To determine the extent to which states are currently using their CWSRFs 

to support conventional wastewater infrastructure versus other qualifying

expenses, we summarized data from the Environmental Protection 

Agency’s (EPA) National Information Management System (NIMS), the 

database EPA uses to track expenditures for all 51 CWSRF programs. To 

assess the reliability of the NIMS data, we interviewed knowledgeable EPA 

officials regarding EPA’s procedures for collecting NIMS data from states 

and monitoring the quality of data submitted by states. We also reviewed 

EPA-issued guidance for states inputting data to the NIMS database. Based 

on these interviews and guidance we determined that the data about the 

usage of CWSRF dollars were sufficiently reliable for the purposes of this 

report. Moreover, CWSRF programs must comply with the Single Audit 

Act and Generally Accepted Accounting Principles (GAAP) and undergo 

independent financial audits. However, we determined that data about the 

number of CWSRF loan agreements were of less certain reliability to 

identify the exact percentage of loan agreements between qualifying 

expenses, given that states vary in the way that they account for the 

number of loan agreements. For example, states do not use common 

standards to report the numbers of projects supported by a loan 

agreement, such as the number of projects that are point source versus 

nonpoint source in nature. Therefore, in figure 2, we reported data about

the number of loan agreements with appropriate caveats. 

To examine the strategies states use to allocate their CWSRF dollars 

among qualifying expenses, we interviewed EPA and state-level agency 

officials and reviewed annual reports and other official EPA and statelevel documents. These interviews included officials at EPA headquarters,

in all 10 EPA regional offices, and select state-level agency officials. We 

conducted field visits to Delaware, Minnesota, Montana, North Carolina, 

Ohio, Texas, and Washington to obtain detailed information about CWSRF 
Appendix I: Scope and Methodology 

allocation strategies. We selected the states using a number of factors, 

including the following:

• geographic diversity, to accommodate variation in water quality issues; 

• diversity of total amount of CWSRF support; 

• diversity in CWSRF-supported projects to include states that do and do not 

support nonpoint source projects with CWSRF dollars and states that 

support varying or unique types of wastewater or nonpoint source 

projects; and 

• a balance of states with and without an Integrated Project Priority Setting 

System. 

Balancing these criteria, our selected states allowed us to make the 

following field visits: 

• seven states in 6 of the 10 EPA regions; 

• the second largest program (Texas) and the second smallest (Delaware); 

• five states that supported nonpoint source projects, to varying degrees; 

and 

• four states with an Integrated Project Priority Setting System and three 

states with a traditional project prioritization system. 

These field visits and the documents provided by state-level officials 

allowed us to include information on a broad range of criteria states use to 

prioritize projects and determine funding. During these field visits, we 

conducted interviews with state-level CWSRF program officials and 

selected recipients of CWSRF loans. To gather information on additional 

states, we conducted semistructured phone interviews with EPA officials 

from all 10 regional offices, and we followed up with selected state-level 

CWSRF officials to discuss allocation strategies and other aspects of their 

programs. We used these interviews to identify the role the EPA regional 

offices may have in shaping the state-level CWSRF programs and to gather

information on regional trends and EPA initiatives regarding the CWSRF. 

We also reviewed each state’s most recent EPA-conducted annual CWSRF 

Program Evaluation Review. 

Page 35 GAO-06-579 Wastewater Infrastructure 
Appendix I: Scope and Methodology 

To examine how states ensure that their allocation strategies result in the 

most efficient and effective use of their CWSRFs, we interviewed EPA and 

state officials about the financial and environmental measures they use to 

assess CWSRF performance. The examination of the most recent Program 

Evaluation Review also provided information on the financial and program 

performance of each state’s CWSRF. In addition, we reviewed EPA’s 

electronic CWSRF Environmental Benefits Reporting System by 

interviewing the contractor that designed it and other knowledgeable EPA 

and state-level officials regarding the process and mechanisms that states 

use to input data. 

We conducted our work between July 2005 and April 2006 in accordance 

with generally accepted government auditing standards. 

Page 36 GAO-06-579 Wastewater Infrastructure 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Page 37 GAO-06-579 Wastewater Infrastructure 

The following tables (tables 2-6) and figure (fig. 9) present selected Clean 

Water State Revolving Fund (CWSRF) financial data. 

Table 2: Clean Water State Revolving Fund for Wastewater Treatment, Nonpoint 

Source, and Estuary Projects, by State, Fiscal Years 1987 through 2005 

Dollars in millions 

State 

Total

 assistance

Wastewater

treatment

Nonpoint 

source Estuaries 

U.S. total $52,703.7 $4,9951.1 $2,060.8 $0

Alabama $772.8 $772.8 $0 $0

Alaska 198.3 152.2 46 0

Arizona 580.4 580.4 0 0

Arkansas 345.5 327.9 17.5 0

California 3,044.2 2,184.1 230.2 0

Colorado 616.7 611.4 5.3 0

Connecticut 956.6 956.6 0 0

Delaware 157.5 146.3 11.2 0

Florida 2,035.3 2,018.8 16.5 0

Georgia 647.2 639.3 7.9 0

Hawaii 183 179.1 3.9 0

Idaho 225.8 223.1 2.7 0

Illinois 1,732.6 1,732.6 0 0

Indiana 1,374.6 1,373.5 1.1 0

Iowa 439.9 437.3 2.6 0

Kansas 724.7 724.7 0 0

Kentucky 463.2 463.2 0 0

Louisiana 407.9 407.9 0 0

Maine 376.4 369.6 6.8 0

Maryland 949.3 853.2 96.1 0

Massachusetts 3,131.8 3,079.6 52.2 0

Michigan 2,149.9 2,149.9 0 0

Minnesota 1,586.9 1,479.5 107.4 0

Mississippi 420 420 0 0

Missouri 1,429.3 1,418.2 11.1 0

Montana 189.6 159.6 30 0

Nebraska 223.3 210.4 12.8 0

Nevada 251.9 239.9 12 0

New Hampshire 382.8 284 98.8 0

Appendix II: Selected Clean Water State 

Revolving Fund Financial Data 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Dollars in millions 

State 

Total

 assistance

Wastewater

treatment

Nonpoint 

source Estuaries 

New Jersey 1,969.7 1,855.7 113.9 0

New Mexico 142.2 142.1 0.1 0

New York 7,942.7 6,512.2 738.7 0

North Carolina 772.5 772.5 0 0

North Dakota 150 142 7.9 0

Ohio 3,233.9 3,067.5 166.4 0

Oklahoma 449.2 449.2 0 0

Oregon 528 514.4 13.6 0

Pennsylvania 1,228.7 1,217.9 10.8 0

Puerto Rico 298.6 298.6 0 0

Rhode Island 634.7 623.9 10.8 0

South Carolina 520.1 512 8.1 0

South Dakota 203.8 192 11.8 0

Tennessee 685 685 0 0

Texas 3,700.1 3,698.2 1.9 0

Utah 233.6 232.2 1.3 0

Vermont 122.1 122.1 0 0

Virginia 1,234.7 1,213.1 21.7 0

Washington 741.9 683.9 58 0

West Virginia 478.9 473.3 5.6 0

Wisconsin 1,196 1,184.3 11.7 0

Wyoming $240 $133.8 $106.2 $0

Source: EPA’s National Information Management System. 

Note: Total amounts may not add to the sum of wastewater treatment, nonpoint source, and estuaries 

assistance categories due to amounts not allocated between categories. 

Page 38 GAO-06-579 Wastewater Infrastructure 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Table 3: Clean Water State Revolving Fund Assistance by Community Size, Fiscal 

Years 1987 through 2005 

Dollars in millions 

State 

 Total

CWSRF 

assistance

Population 

less than

3,500

Population 

3,500 to

9,999 

Population 

10,000 to

99,999

Population 

100,000 and

above 

U.S. total $52,703.7 $5,539.5 $6,564.2 $17,608.8 $22,919.2

Alabama $772.8 $30.8 $81.2 $413.7 $247.1

Alaska 198.3 14.4 75.1 24 84.8

Arizona 580.4 62.1 135.3 258.4 124.6

Arkansas 345.5 47.3 76.1 153.7 68.4

California 3,044.2 72.2 72.2 952.6 1,947.2

Colorado 616.7 106.4 99.6 291.6 119

Connecticut 956.6 45.7 162.4 542.7 205.9

Delaware 157.5 45.1 50.1 62.4 0

Florida 2,035.3 91.4 252.2 785.5 906.1

Georgia 647.2 62.3 153.5 304.1 127.3

Hawaii 183 67 14.6 97.5 3.9

Idaho 225.8 54.6 48.3 87.9 35

Illinois 1,732.6 120.6 208.8 688.5 714.7

Indiana 1,374.6 238.9 209.9 452.3 473.5

Iowa 439.9 137 153 95.9 54

Kansas 724.7 189.3 124 273.9 137.5

Kentucky 463.2 78.2 128.1 226.3 30.6

Louisiana 407.9 10.2 49.5 217.2 131

Maine 376.4 54.7 156.3 165.3 0

Maryland 949.3 65.5 89.1 208.9 585.8

Massachusetts 3,131.8 71.6 257.6 1,567.8 1,234.9

Michigan 2,149.9 112.4 155.9 786.9 1,094.8

Minnesota 1,586.9 302.7 189.9 220.8 873.6

Mississippi 420 48.5 49.5 292.2 29.7

Missouri 1,429.3 128 215.8 299.5 785.9

Montana 189.6 84.5 23.4 81.7 0

Nebraska 223.3 80.2 51.3 40.7 51.1

Nevada 251.9 13.3 23.8 62.9 151.8

New Hampshire 382.8 21.3 49 213.1 99.4

New Jersey 1,969.7 123 199.7 921.4 725.6

New Mexico 142.2 5 28 65.2 44.1

Page 39 GAO-06-579 Wastewater Infrastructure 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Dollars in millions 

State 

 Total

CWSRF 

assistance

Population 

less than

3,500

Population 

3,500 to

9,999 

Population 

10,000 to

99,999

Population 

100,000 and

above 

New York 7,942.7 405.4 255.5 1,092 6,189.7

North Carolina 772.5 91.9 142.7 463.1 74.8

North Dakota 150 37.9 2.1 109.9 0.1

Ohio 3,233.9 484.1 358.1 987.1 1,404.7

Oklahoma 449.2 49.9 52.2 219.3 127.7

Oregon 528 71.3 190 203 63.7

Pennsylvania 1,228.7 566.7 346.8 304 10.5

Puerto Rico 298.6 96.3 41 81.4 79.9

Rhode Island 634.7 51 52.8 161.4 369.5

South Carolina 520.1 21 93.6 351.8 53.7

South Dakota 203.8 40 14.1 82.1 67.6

Tennessee 685 40.3 118.3 276.8 249.6

Texas 3,700.1 234.1 539.1 975 1,951.8

Utah 233.6 42.1 47.4 81.1 63

Vermont 122.1 30.5 51.6 40 0

Virginia 1,234.7 180.4 187.6 464.6 402.1

Washington 741.9 149.7 132.6 272.9 186.8

West Virginia 478.9 158.6 173.7 146.6 0

Wisconsin 1,196 166.2 126.9 381.3 521.7

Wyoming $240 $37.8 $54.9 $132.3 $15.1

Source: EPA’s National Information Management System. 

Note: Numbers may not add to total due to rounding. 

Page 40 GAO-06-579 Wastewater Infrastructure 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Table 4: Clean Water State Revolving Fund National Financial Indicators, Fiscal 

Years 1987 through 2005 

Dollars in millions 

State 

Project 

disbursements 

as a percentage

of cash draws

Assistance 

provided as a 

percentage of

funds available 

Project 

disbursements 

as a 

percentage of

assistance 

provided

Sustainability/

retained

earnings

U.S. total 212% 95% 85% $4,314.0

States that have leveraged

Alabama 305% 95% 88% $35.3

Arizona 277 112 72 4.6

Arkansas 187 91 81 27.4

California 178 94 91 396.0

Colorado 313 93 85 14.0

Connecticut 276 98 89 28.9

Florida 195 107 72 276.5

Illinois 156 92 93 196.0

Indiana 187 81 77 41.2

Iowa 151 80 91 41.4

Kansas 315 104 85 -11.3

Maine 210 93 92 32.1

Maryland 163 92 83 136.0

Massachusetts 309 116 83 292.0

Michigan 195 103 86 -140.6

Minnesota 373 98 97 100.6

Missouri 233 83 94 75.2

Nevada 221 91 73 13.7

New Jersey 206 71 79 418.7

New York 323 103 100 219.6

North Dakota 139 64 98 19.5

Ohio 193 102 67 91.8

Oklahoma 229 84 86 30.7

Rhode Island 299 129 69 7.9

South Dakota 159 98 71 23.4

Texas 294 94 86 237.2

Virginia 209 85 86 208.6

Page 41 GAO-06-579 Wastewater Infrastructure 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Dollars in millions 

State 

Project 

disbursements 

as a percentage

of cash draws

Assistance 

provided as a 

percentage of

funds available 

Project 

disbursements 

as a 

percentage of

assistance 

provided

Sustainability/

retained

earnings

States that have not leveraged

Alaska 116 81 80 31.2

Delaware 118 98 68 9.7

Georgia 115 79 78 147.8

Hawaii 142 54 99 52.3

Idaho 143 90 69 45.2

Kentucky 130 86 74 79.5

Louisiana 142 89 83 42.9

Mississippi 149 100 76 75.9

Montana 167 98 97 6.9

Nebraska 161 91 82 18.8

New 

Hampshire 166 100 72 33.0

New Mexico 123 70 89 33.7

North Carolina 148 97 76 122.5

Oregon 159 108 75 61.1

Pennsylvania 140 88 89 129.6

Puerto Rico 126 78 56 21.4

South Carolina 166 93 84 123.4

Tennessee 152 90 74 150.7

Utah 185 100 96 20.1

Vermont 123 88 94 2.1

Washington 171 100 77 102.4

West Virginia 129 93 91 29.9

Wisconsin 171 109 85 147.8

Wyoming 170% 91% 68% $36.7

Source: EPA’s National Information Management System. 

Note: Numbers may not add to totals due to rounding. 

Page 42 GAO-06-579 Wastewater Infrastructure 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Table 5: Clean Water State Revolving Funds Available for Projects, Fiscal Years 1987 through 2005 

Dollars in millions 

Federal 

capitalization

State 

contributions

Leveraged

bonds

Gross loan

principal 

repayments

Gross loan

interest 

payments 

Gross

investment

earnings

SRF funds

available for 

projects 

U.S. total $23,251.5 $4,806 $23,424.4 $13,187.9 $7,459.6 $4,955.7 $55,266.2

Alabama $249 $107.3 $587.1 $224.2 $176.4 $165.5 $812.3

Alaska 137.7 27.8 0 54 17.5 21.7 245.2

Arizona 158.6 40.5 276 115.8 49.1 50.4 518.6

Arkansas 162.8 31 116.9 97.6 59.6 36.5 378.7

California 1,709.8 309.4 298.9 649.3 306.1 95.6 3,229.5

Colorado 169.3 39.3 557 145.7 76.7 111.1 660.6

Connecticut 327.2 103.9 800.4 291.2 110.8 263.8 980.5

Delaware 107.2 21.4 0 26.3 5.6 4.1 160.3

Florida 844.1 174.3 150.7 528.6 209.4 81.6 1911

Georgia 450.1 88.8 0 161.1 93.1 54.6 821.3

Hawaii 169.8 662.9 0 61.6 28.6 23.7 339.8

Idaho 109 21.8 0 79.2 30.9 14.3 250.8

Illinois 1,028.4 188.8 189.5 418.6 142.5 69.7 1,881.9

Indiana 557.6 115.5 1,301.2 168.2 108.4 263.1 1,688

Iowa 283.3 53.1 186.5 139.3 82.9 115.1 547.4

Kansas 211.4 43.1 403.5 137.3 78.8 54.4 695.4

Kentucky 304.8 63 0 103.4 51.6 27.9 538.5

Louisiana 249.5 50.3 0 127.8 50.3 16.6 460.4

Maine 177.3 37.8 97.3 117.6 58.5 23 404.7

Maryland 544.2 102.4 160.9 234.1 134.8 104.8 1,027.7

Massachusetts 831.1 171 2,747.9 490.9 616.7 421 2,705

Michigan 1,023.1 205 1967 387.5 187.5 314.9 2,079.7

Minnesota 434.1 93.5 999 479.5 255.2 189.3 1,625.6

Mississippi 225.1 45.7 0 84 56.9 19 421.7

Missouri 625.7 121.9 1,400.5 489.2 338 65.3 1,713.8

Montana 114 33.7 0 46.9 14.1 6.9 194.2

Nebraska 119.7 24.5 0 87.6 27.6 15.7 245.8

Nevada 108.7 20.8 104.7 42.5 34.2 11.3 278.3

New Hampshire 226.3 47.4 0 83.6 25.4 7.5 381.2

New Jersey 1,048.8 220.6 950.1 605.1 358.7 282.6 2,762.2

New Mexico 113 27 0 34 20.3 13.3 203.1

New York 2,574.7 515 6,318.1 2,374.1 1,355.5 1,106.8 7,694.8

Page 43 GAO-06-579 Wastewater Infrastructure 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Dollars in millions 

Federal 

capitalization

State 

contributions

Leveraged

bonds

Gross loan

principal 

repayments

Gross loan

interest 

payments 

Gross

investment

earnings

SRF funds

available for 

projects 

North Carolina 424.6 88.8 0 177.1 81.9 40.5 796

North Dakota 102.4 24.8 75.3 41.2 19.9 45.2 233.2

Ohio 1,300.2 270.4 1,173.3 524.8 391.9 181.7 3,164.3

Oklahoma 178.4 41.3 146 219.9 22.6 31.7 536.1

Oregon 263.5 54.6 0 121.1 57.8 21.4 489.8

Pennsylvania 894 181 0 292.2 76.8 52.8 1,403.6

Puerto Rico 287.9 57.6 0 37.1 16.4 5 381.5

Rhode Island 149.7 29.9 416.3 67 41 52.8 493.1

South Carolina 265.9 53.2 0 123.8 81.9 41.5 562.3

South Dakota 114 22.7 4.5 64.4 21.6 24.4 207.3

Tennessee 375.3 78.7 0 174.7 110 40.7 764.4

Texas 1,220.9 248.3 1,615.1 1,236 942.7 137.6 3,936.1

Utah 135.4 24.5 0 58.8 10.1 10 233.4

Vermont 103.6 20.7 0 15.9 0 2.1 138.1

Virginia 552.9 110.8 380.7 315.6 169.7 102.7 1,451.1

Washington 388.1 77.6 0 189 77.7 24.7 741.7

West Virginia 347.1 69.4 0 81.5 13.4 16.5 514.1

Wisconsin 605.5 119.3 0 275.2 154.2 44.9 1,100

Wyoming $119.8 $24 $0 $86.7 $8.1 $28.6 $262.4

Source: EPA’s National Information Management System. 

Note: Numbers may not add to totals due to rounding. 

Page 44 GAO-06-579 Wastewater Infrastructure 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Figure 9: Annual Average Interest Rates for the Clean Water State Revolving Fund

Compared with Annual Average Market Interest Rates 

Source: EPA’s National Information Management System.

0

1

2

3

4

5

6

7

8

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

National CWSRF average

Market rate

Year 

Percentage rate 

Note: The market rate based on the Bond Buyer index for 20-year general obligation (GO) bonds with 

a rating equivalent to Moody’s Aa and Standard and Poor’s AA-minus. Data is the average of the 

reported weekly Bond Buyer 20-bond GO index for each fiscal year ending June 30. 

Page 45 GAO-06-579 Wastewater Infrastructure 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Table 6: Assistance Provided Through the Clean Water State Revolving Fund

Program and Other State Funded Clean Water and Loan Grant Programs, Fiscal 

Years 1987 through 2005 

Dollars in millions 

 CWSRF program State-funded loans State-funded grants

 U.S. total $52,703.7

 Reported total $3,865.3 $4,041.5

Alabama $772.8 $0 $0

Alaska 198.3 0 129.9

Arizona 580.4 NA 1.2

Arkansas 345.5 51.4 3

California 3,044.2 67.6 116.8

Colorado 616.7 48.7 30.4

Connecticut 956.6 88.7 350.9

Delaware 157.5 4.5 35.4

Florida 2,035.3 0 148.3

Georgia 647.2 68.2 0

Hawaii 183 44.8 18.5

Idaho 225.8 3.5 26.3

Illinois 1,732.6 0 489.5

Indiana 1,374.6 23.8 54.7

Iowa 439.9 0 0

Kansas 724.7 0 0

Kentucky 463.2 94 36.9

Louisiana 407.9 0 0

Maine 376.4 196.5 89.7

Maryland 949.3 0 303.6

Massachusetts 3,131.8 42.1 0

Michigan 2,149.9 2 0

Minnesota 1,586.9 0 194

Mississippi 420 1.5 0

Missouri 1,429.3 2.3 97.1

Montana 189.6 0 0

Nebraska 223.3 0 0

Nevada 251.9 0 0

New Hampshire 382.8 0 173.5

New Jersey 1,969.7 369.3 0

New Mexico 142.2 27.6 63.4

Page 46 GAO-06-579 Wastewater Infrastructure 
Appendix II: Selected Clean Water State 

Revolving Fund Financial Data

Dollars in millions 

 CWSRF program State-funded loans State-funded grants

New York 7,942.7 NA NA

North Carolina 772.5 62.9 228.9

North Dakota 150 0 0

Ohio 3,233.9 625.8 319

Oklahoma 449.2 112 19.2

Oregon 528 NA NA

Pennsylvania 1,228.7 426.9 48.6

Puerto Rico 298.6 0 0

Rhode Island 634.7 58.1 37.4

South Carolina 520.1 NA NA

South Dakota 203.8 0 NA

Tennessee 685 0 0

Texas 3,700.1 225 0

Utah 233.6 54.2 22.2

Vermont 122.1 0.7 NA

Virginia 1,234.7 0 112

Washington 741.9 3.1 591.2

West Virginia 478.9 248.1 52.2

Wisconsin 1,196 912 247.5

Wyoming $240 $0 $0

Legend 

NA=data not available 

Source: EPA’s National Information Management System. 

Note: Numbers may not add to totals due to rounding. 

Page 47 GAO-06-579 Wastewater Infrastructure 
Appendix III: GAO

A

 Contact and Staff 

cknowledgments 

Page 48 GAO-06-579 Wastewater Infrastructure 

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact John Stephenson (202) 512-3842 

In addition to the individual named above; Steven Elstein, Assistant 

Director; Mark Braza; Greg Marchand; Tim Minelli; Justin L. Monroe; 

Jonathan G. Nash; Alison O’Neill; and Amber Simco made key 

contributions to this report. 

Staff 

Acknowledgments 

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